0000930413-01-501318.txt : 20011019 0000930413-01-501318.hdr.sgml : 20011019 ACCESSION NUMBER: 0000930413-01-501318 CONFORMED SUBMISSION TYPE: N-14 PUBLIC DOCUMENT COUNT: 2 FILED AS OF DATE: 20011017 FILER: COMPANY DATA: COMPANY CONFORMED NAME: LAZARD FUNDS INC CENTRAL INDEX KEY: 0000874964 STANDARD INDUSTRIAL CLASSIFICATION: [] STATE OF INCORPORATION: MD FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: N-14 SEC ACT: 1933 Act SEC FILE NUMBER: 333-71782 FILM NUMBER: 1761060 BUSINESS ADDRESS: STREET 1: STATE STREET BANK & TRUST CO STREET 2: PO BOX 9110 CITY: BOSTON STATE: MA ZIP: 02109 BUSINESS PHONE: 2126326000 MAIL ADDRESS: STREET 1: STATE STREET BANK & TRUST CO STREET 2: PO BOX 9110 CITY: BOSTON STATE: MA ZIP: 02109 N-14 1 c22088_n14-.txt AMENDMENT TO REGISTRATION STATEMENT Registration No. 333-_____ ================================================================================ U.S. SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM N-14 REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 |_| Pre-Effective Amendment No. ___ |_| Post-Effective Amendment No. ___ (Check appropriate box or boxes) The LAZARD FUNDS, INC. -------------------------------------------------------------------------------- (Exact Name of Registrant as Specified in Charter) (800) 823-6300 -------------------------------------------------------------------------------- (Area Code and Telephone Number) 30 Rockefeller Plaza, New York, New York 10112 -------------------------------------------------------------------------------- (Address of Principal Executive Offices: Number, Street, City, State, Zip Code) (Name and Address of Agent for Service) David M. Goldenberg, Esq. c/o The Lazard Funds 30 Rockefeller Plaza New York, New York 10112 copy to: Stuart H. Coleman, Esq. Stroock & Stroock & Lavan LLP 180 Maiden Lane New York, New York 10038-4982 Approximate Date of Proposed Public Offering: As soon as practicable after this Registration Statement is declared effective. It is proposed that this filing will become effective on November 16, 2001 pursuant to Rule 488. An indefinite number of Registrant's shares of common stock, par value $0.001 per share, has been registered pursuant to Rule 24f-2 under the Investment Company Act of 1940. Accordingly, no filing fee is being paid at this time. LAZARD GLOBAL EQUITY PORTFOLIO Form N-14 Cross Reference Sheet Pursuant to Rule 481(a) Under the Securities Act of 1933 FORM N-14 PROSPECTUS/PROXY ITEM NO. STATEMENT CAPTION --------- -------------------------------- Part A ------ Item 1. Beginning of Registration Statement Cover Page and Outside Front Cover Page of Prospectus Item 2. Beginning and Outside Back Cover Cover Page Page of Prospectus Item 3. Fee Table, Synopsis Information Summary and Information About and Risk Factors the Portfolios Item 4. Information About the Transaction Notice of Special Meeting of Shareholders; Summary and Information About the Portfolios; Reasons for the Exchange; Information About the Exchange Item 5. Information About the Registrant Notice of Special Meeting of Shareholders; Summary and Information About the Portfolio; Reasons for the Exchange; Information About the Exchange; Additional Information About the Portfolios Item 6. Information About the Company Notice of Special Meeting of Being Acquired Shareholders; Reasons for the Exchange; Information About the Exchange; Additional Information About the Portfolios Item 7. Voting Information Notice of Special Meeting of Shareholders; Voting Information Item 8. Interest of Certain Persons Not Applicable and Experts Item 9. Additional Information Required Not Applicable for Reoffering by Persons Deemed to be Underwriters STATEMENT OF ADDITIONAL PART B INFORMATION CAPTION --------- -------------------------------- Item 10. Cover Page Cover Page Item 11. Table of Contents Not Applicable Item 12 Additional Information about Statement of Additional the Registrant Information of The Lazard Funds, Inc. dated May 1, 2001* Item 13 Additional Information about the Statement of Additional Company being Acquired Information of The Lazard Funds, Inc. dated May 1, 2001* Item 14. Financial Statements Annual Report of The Lazard Funds, Inc. for the fiscal year ended December 31, 2000 Semi-Annual Report for The Lazard Funds, Inc. for the period ended June 30, 2001. PART C --------- Item 15. Indemnification Item 16. Exhibits Item 17. Undertakings ---------- * Incorporated herein by reference to the Registration Statement of the Registrant on Form N-1A, filed April 30, 2001 (File No. 33-40682). LAZARD GLOBAL EQUITY PORTFOLIO c/o The Lazard Funds, Inc. 30 Rockefeller Plaza New York, New York 10112 NOTICE OF SPECIAL MEETING OF SHAREHOLDERS Dear Shareholder: The Board of Directors of The Lazard Funds, Inc. (the "Fund") has approved a proposal to exchange the assets of Lazard Global Equity Portfolio ("Global Equity Portfolio"), attributable to its Institutional Shares and Open Shares, for Institutional Shares and Open Shares, respectively, of Lazard International Equity Portfolio ("International Equity Portfolio"), each a series of the Fund. Promptly thereafter, Global Equity Portfolio will distribute pro rata International Equity Portfolio shares received in the exchange (the "Exchange") to its shareholders. Thus, each shareholder of Global Equity Portfolio will receive a number of Institutional Shares or Open Shares of International Equity Portfolio (or fractions thereof) equal in value to the aggregate net asset value of the shareholder's Institutional or Open Shares, respectively, of Global Equity Portfolio as of the date of the Exchange. The Exchange will not be a taxable event. Shareholders will not realize any capital gain or loss as a direct result of the Exchange. The Fund's Board believes that the Exchange will permit shareholders of Global Equity Portfolio to pursue substantially similar investment goals in a larger fund that has a lower expense ratio. A description of the proposal is contained in the attached Prospectus/Proxy Statement, which you are encouraged to read carefully. A Special Meeting of Shareholders of Global Equity Portfolio will be held at the offices of the Fund, 30 Rockefeller Plaza, 58th Floor, New York, New York, on Wednesday, December 12, 2001 at 10:00 a.m. to approve the proposal. You may vote by completing, dating, signing and returning the enclosed proxy card. A self-addressed, postage-paid envelope has been enclosed for your convenience. YOU SHOULD BE AWARE THAT ONE SHAREHOLDER OF GLOBAL EQUITY PORTFOLIO OWNS A SUFFICIENT AMOUNT OF THE PORTFOLIO'S OUTSTANDING VOTING SECURITIES TO APPROVE THE PROPOSED EXCHANGE AND HAS INDICATED THAT IT WILL VOTE IN FAVOR OF THE EXCHANGE. CONSEQUENTLY, NO FURTHER SHAREHOLDER ACTION IS REQUIRED IN ORDER TO AUTHORIZE THE EXCHANGE AND YOU ARE NOT REQUIRED TO SEND US A PROXY. The Exchange is expected to occur after the close of business on December 14, 2001 or shortly thereafter. If you have any questions about the proposed Exchange, please call 1-800-823-6300. Sincerely, Herbert W. Gullquist, President, THE LAZARD FUNDS, INC. November 21, 2001 November 16, 2001 PROSPECTUS/PROXY STATEMENT INTRODUCTION This Prospectus/Proxy Statement is furnished by the Board of Directors (the "Board") of The Lazard Funds, Inc. (the "Fund"), an open-end management investment company, in connection with a proposed exchange of the assets, subject to liabilities, of Lazard Global Equity Portfolio ("Global Equity Portfolio"), for shares of Lazard International Equity Portfolio ("International Equity Portfolio"), each a diversified series of the Fund, as further described in this Prospectus/Proxy Statement (the "Exchange"). A Special Meeting of Shareholders of Global Equity Portfolio will be held at the offices of the Fund, 30 Rockefeller Plaza, 58th Floor, New York, New York 10112, on Wednesday, December 12, 2001 at 10:00 a.m. to approve the proposed Exchange. You should be aware that one shareholder of Global Equity Portfolio owns a sufficient amount of the Portfolio's outstanding voting securities to approve the proposed Exchange and has indicated that it will vote in favor of the Exchange. Consequently, no further shareholder action is required in order to authorize the Exchange and you are not required to send us a proxy. The Exchange is expected to occur after the close of business on December 14, 2001 or shortly thereafter (the "Closing Date"). This Prospectus/Proxy Statement will be mailed to Global Equity Portfolio's shareholders on or about November 21, 2001 to shareholders of record as of the close of business on November 9, 2001. Global Equity Portfolio closed to new investments on October 25, 2001, other than investments through the Automatic Reinvestment Plan or Automatic Investments. This Prospectus/Proxy Statement, which should be retained for future reference, sets forth concisely information about the Portfolios that you should know before voting on the proposal or investing in International Equity Portfolio. A Statement of Additional Information, dated November __, 2001, relating to this Prospectus/Proxy Statement, has been filed with the Securities and Exchange Commission (the "Commission") and is incorporated herein by reference in its entirety. The Commission maintains a Web site (http://www.sec.gov) that contains the Statement of Additional Information, material incorporated by reference, and other information regarding the Portfolios which you can access for free. For a free copy of the Statement of Additional Information, write to the Fund at its principal executive offices, located at 30 Rockefeller Plaza, 58th Floor, New York, New York 10112, or call 1-800-823-6300. ----------------------------------------------------------------------- THE SECURITIES AND EXCHANGE COMMISSION HAS NOT APPROVED OR DISAPPROVED THE SHARES DESCRIBED IN THIS PROSPECTUS/PROXY STATEMENT OR DETERMINED WHETHER THIS PROSPECTUS/PROXY STATEMENT IS TRUTHFUL OR COMPLETE. ANYONE WHO TELLS YOU OTHERWISE IS COMMITTING A CRIME. ----------------------------------------------------------------------- AN INVESTMENT IN A PORTFOLIO IS NOT A BANK DEPOSIT. IT IS NOT INSURED OR GUARANTEED BY THE FDIC OR ANY OTHER GOVERNMENT AGENCY. IT IS NOT A COMPLETE INVESTMENT PROGRAM AND INVOLVES CERTAIN RISKS, INCLUDING THE POSSIBLE LOSS OF PRINCIPAL. ----------------------------------------------------------------------- -2- TABLE OF CONTENTS PAGE Summary and Information About the Portfolios................................ Reasons for the Exchange.................................................... Information about the Exchange.............................................. Additional Information about each Portfolio................................. Voting Information.......................................................... Financial Statements and Experts............................................ Other Matters............................................................... Notice to Banks, Broker/Dealers and Their Nominees........................................................ Appendix A: Agreement and Plan of Reorganization.................................................... A-1 -3- SUMMARY AND INFORMATION ABOUT THE PORTFOLIOS Each Portfolio has the same investment adviser, distributor and investment objective. The Portfolios also have substantially similar management policies. The substantive differences between Global Equity Portfolio and International Equity Portfolio are set forth in this Prospectus/Proxy Statement. The Fund's Prospectus dated May 1, 2001, Annual Report for the fiscal year ended December 31, 2000, including each Portfolio's audited financial statements for the fiscal year, and Semi-Annual Report for the six months ended June 30, 2001 accompany this Prospectus/Proxy Statement. Such Prospectus and financial statements, as they pertain to the Portfolios, are incorporated herein by reference. This Summary is qualified by reference to the more complete information contained elsewhere in this Prospectus/Proxy Statement, the Fund's Prospectus and the Agreement and Plan of Reorganization attached to this Prospectus/Proxy Statement as Appendix A (the "Plan"). PROPOSED TRANSACTION. The Fund's Board, including the Board members who are not "interested persons" (as defined in the Investment Company Act of 1940, as amended (the "1940 Act")), has unanimously approved the Plan. The Plan provides that, subject to the approval of a majority of the outstanding voting securities of Global Equity Portfolio, Global Equity Portfolio will transfer to International Equity Portfolio all of its assets (subject to liabilities), attributable to its Institutional Shares and Open Shares, in exchange for Institutional Shares and Open Shares, respectively, of International Equity Portfolio having an aggregate net asset value equal to the aggregate net asset value of the Institutional Shares and Open Shares, respectively, of Global Equity Portfolio as of the Closing Date. Global Equity Portfolio will distribute such International Equity Portfolio shares among its shareholders. Each Institutional Class and Open Class shareholder of Global Equity Portfolio will receive shares of the corresponding class of International Equity Portfolio (or fractions thereof) having an aggregate net asset value equal to the aggregate net asset value of the shareholder's Institutional Shares or Open Shares of Global Equity Portfolio as of the Closing Date. Thereafter, Global Equity Portfolio will be terminated as a series of the Fund. As a result of the Exchange, each shareholder will cease to be a shareholder of Global Equity Portfolio and will become a shareholder of International Equity Portfolio as of the close of business on the Closing Date. The Fund's Board has concluded unanimously that the Exchange would be in the best interests of shareholders of Global Equity Portfolio and that the interests of existing shareholders of Global Equity Portfolio would not be diluted as a result of the transactions contemplated thereby. See "Reasons for the Exchange." TAX CONSEQUENCES. The Exchange is designed to qualify for federal income tax purposes as a tax-free reorganization. As a condition to the closing of the Exchange, each Portfolio will receive an opinion of counsel to the effect that, for federal income tax purposes, (1) no gain or loss will be recognized by Global Equity Portfolio shareholders for federal income tax purposes as a result of the Exchange, (2) the holding period and aggregate tax basis of -4- International Equity Portfolio shares received by a Global Equity Portfolio shareholder will be the same as the holding period and aggregate tax basis ofthe shareholder's Global Equity Portfolio shares, and (3) the holding period and tax basis of Global Equity Portfolio's assets transferred to International Equity Portfolio as a result of the Exchange will be the same as the holding period and tax basis of such assets held by Global Equity Portfolio immediately prior to the Exchange. See "Information about the Exchange--Federal Income Tax Consequences." COMPARISON OF THE PORTFOLIOS. The following discussion is qualified by the more complete information in the Fund's Prospectus. MANAGEMENT POLICIES. Each Portfolio is a diversified series of the Fund, an open-end, management investment company, and is advised by Lazard Asset Management ("LAM"). Each Portfolio has the same investment objective, which is to seek long-term capital appreciation. The management policies of the Portfolios are substantially similar in that each Portfolio seeks to achieve its investment objective by investing primarily in equity securities, principally common stocks, of relatively large companies that LAM believes are undervalued based on their earnings, cash flow or asset values. Global Equity Portfolio invests primarily in U.S. and non-U.S. companies with market capitalizations in the range of the Morgan Stanley Capital International (MSCI(R)) World(R) Index, while International Equity Portfolio invests primarily in non-U.S. companies with market capitalizations in the range of the MSCI Europe, Australasia and Far East (EAFE(R)) Index. Under normal circumstances, each Portfolio invests at least 80% of its assets in equity securities, which include common stocks, preferred stocks and convertible securities. Global Equity Portfolio currently invests at least 25% of its total assets in securities of U.S. companies; International Equity Portfolio does not typically invest in securities of U.S. companies. Each Portfolio may engage in foreign currency transactions, lend portfolio securities and enter into swap agreements. Under adverse market conditions, each Portfolio may invest some or all of its assets in money market securities. A Portfolio would do this to avoid losses, but it may result in the Portfolio not achieving its investment objective. INVESTMENT RESTRICTIONS. Differences between the Portfolios are noted below, although none of these differences has any material effect on the management of the Portfolios. Global Equity Portfolio may invest in securities issued by investment companies to the extent permitted by the 1940 Act (currently 10% of the Portfolio's total assets in securities of other investment companies, 5% of the Portfolio's total assets in the securities of any one investment company and 3% of the total voting stock of any one investment company), while International Equity Portfolio may not purchase securities of other investment companies, except in connection with a merger, consolidation, acquisition or reorganization. Global Equity Portfolio may invest up to 15% of the value of its net assets in securities as to which a liquid trading market does not exist, whereas International Equity Portfolio may invest up to 10% of the -5- value of its net assets in such investments. Each Portfolio may borrow money from banks for temporary or emergency (not leveraging) purposes to the extent permitted under the 1940 Act (currently no more than 33-1/3% of total assets). In addition, Global Equity Portfolio may borrow for investment purposes to the extent permitted under the 1940 Act. Global Equity Portfolio may lend its portfolio securities to brokers, dealers and other financial institutions up to 33-1/3% of the value of its total assets, and International Equity Portfolio may lend its Portfolio securities up to 10% of the value of its total assets. Global Equity Portfolio, but not International Equity Portfolio, may engage in futures transactions and buy and sell call and put options. Each Portfolio limits investments in securities of issuers conducting their principal business activity in the same industry to less than 25% of the current value of its total assets. RISK FACTORS. The investment risks of each Portfolio are similar. Each Portfolio invests primarily in common stocks of relatively large companies that LAM believes are undervalued. Stocks fluctuate in price, often based on factors unrelated to the issuer's value. The value of an investment in either Portfolio fluctuates, which means you could lose money. Foreign securities include special risks, such as exposure to currency fluctuations, less developed or less efficient trading markets, political instability, a lack of company information, differing auditing and legal standards, and potentially less liquidity. Value stocks involve the risk that they may never reach what LAM believes is their full market value. They also may decline in price, even though in theory they are already undervalued. See each Portfolio's "Goals, Strategies, Risk/Return and Expenses--Principal Investment Risks" section in the Fund's Prospectus for a further description of management policies and investment risks. FEES AND EXPENSES. The following information concerning fees and expenses is derived from information set forth for each Portfolio under the caption "Goals, Strategies, Risk/Return and Expenses" in the Fund's Prospectus. Annual Portfolio Operating Expenses set forth below are for the Fund's fiscal year ended December 31, 2000. The "Pro Forma After Exchange - International Equity Portfolio" column illustrates the expenses International Equity Portfolio would have incurred in the fiscal year ended December 31, 2000, giving effect to the Exchange as if it would have occurred as of the beginning of such fiscal year. Shareholder Transaction Fees are paid from your account. Annual Portfolio Operating Expenses are paid out of Portfolio assets, so their effect is included in the Portfolio's share price. -6-
PRO FORMA AFTER EXCHANGE-- GLOBAL EQUITY INTERNATIONAL EQUITY INTERNATIONAL EQUITY PORTFOLIO PORTFOLIO PORTFOLIO ------------------------- ------------------------ ----------------------- INSTITUTIONAL OPEN INSTITUTIONAL OPEN INSTITUTIONAL OPEN SHARES SHARES SHARES SHARES SHARES SHARES ------------- ------ ------------- ------ ------------- ------ SHAREHOLDER TRANSACTION FEES Maximum redemption fee * * * * * * (as a % of amount redeemed)* (CHARGED ONLY WHEN SELLING OR EXCHANGING SHARES YOU HAVE OWNED FOR 30 DAYS OR LESS.) ANNUAL PORTFOLIO OPERATING EXPENSES (EXPENSES THAT ARE DEDUCTED FROM PORTFOLIO ASSETS): Management fees .75% .75% .75% .75% .75% .75% Distribution and service (12b-1) fees None .25% None .25% None .25% Other expenses .31% .66% .13% .15% .13% .13% ------------------------------------- ---- ---- --- ---- --- ---- Total annual portfolio Operating expenses 1.06% 1.66% .88% 1.15% .88% 1.13% ------------------------------------- ---- ---- --- ---- --- ---- Fee waiver and expense reimbursement** (.01)% (.31)% N/A N/A N/A N/A ------------------------------------- ---- ---- --- ---- --- ---- Net expenses 1.05%* 1.35% .88% 1.15% .88% 1.13% ----
---------- * A 1.00% redemption fee will be charged for shares purchased on or after __________, 2001. ** Reflects a contractual obligation by LAM to waive its fees and/or reimburse Global Equity Portfolio through December 31, 2001 to the extent Total Annual Portfolio Operating Expenses exceed 1.05% and 1.35% of the average daily net assets of Global Equity Portfolio's Institutional Shares and Open Shares, respectively. EXPENSE EXAMPLE. This example is intended to help you compare the fees and expenses of investing in Global Equity Portfolio, International Equity Portfolio and the combined Portfolio after the Exchange. It uses the same hypothetical conditions other funds use in their prospectuses: $10,000 initial investment, 5% annual return each year, redemption at the end of each period and no changes in operating expenses, except for the first year periods reflected in the table for Global Equity Portfolio to give effect to the fee waiver and expense reimbursement. The figures shown would be the same whether you sold your shares at the end of a period or kept them. Because this example is hypothetical and for comparison only, your actual costs may be higher or lower. -7-
PRO FORMA AFTER EXCHANGE-- GLOBAL EQUITY INTERNATIONAL EQUITY INTERNATIONAL EQUITY PORTFOLIO PORTFOLIO PORTFOLIO ------------------------- ------------------------ ----------------------- INSTITUTIONAL OPEN INSTITUTIONAL OPEN INSTITUTIONAL OPEN SHARES SHARES SHARES SHARES SHARES SHARES ------------- ------ ------------- ------ ------------- ------ 1 Year $ 107 $ 137 $ 90 $ 117 $ 90 $ 115 3 Years $ 336 $ 493 $ 281 $ 365 $ 281 $ 359 5 Years $ 584 $ 873 $ 488 $ 633 $ 488 $ 622 10 Years $1,293 $1,939 $1,084 $1,398 $1,084 $1,375
PAST PERFORMANCE. The two tables below show some of the risks of investing in International Equity Portfolio. The first table shows you how the performance of International Equity Portfolio's Institutional Shares has varied from year to year. The second compares the performance of International Equity Portfolio's Institutional Shares and Open Shares over time to that of the MSCI EAFE Index, an unmanaged, broadly diversified international index comprised of equity securities of approximately 1,000 companies located outside the United States. Both tables assume reinvestment of dividends and distributions. For performance of Global Equity Portfolio, see the Fund's Prospectus under the caption of "Goals, Strategies, Risk/Return and Expenses--Performance Bar Chart and Table." Past performance does not indicate how a Portfolio will perform in the future. YEAR-BY-YEAR TOTAL RETURN AS OF 12/31 EACH YEAR INTERNATIONAL EQUITY PORTFOLIO INSTITUTIONAL SHARES (6.62)% 31.05% 0.24% 13.14% 15.64% 11.84% 16.04% 24.07% (10.55)% -------------------------------------------------------------------------------- 1992 1993 1994 1995 1996 1997 1998 1999 2000 Best Quarter: 12/31/98 17.96% Worst Quarter: 9/30/98 (17.11)% The year-to-date total return for Institutional Shares of International Equity Portfolio as of 9/30/01 was ___%. AVERAGE ANNUAL TOTAL RETURNS AS OF 12/31/00 Inception Since Date 1 Year 5 Years Inception ---- ------ ------- --------- International Equity Portfolio Institutional Shares 10/29/91 (10.55)% 10.74% 9.95% International Equity Portfolio Open Shares 1/23/97 (10.95)% N/A 9.99% MSCI EAFE Index (14.16)% 7.14% 7.71% (Institutional) 8.46% (Open) -8- INVESTMENT ADVISER. LAM serves as each Portfolio's investment adviser. LAM is a division of Lazard Freres & Co. LLC, a New York limited liability company ("Lazard"), which is registered as an investment adviser and broker-dealer with the Commission and is a member of the New York, American and all principal regional exchanges. Lazard provides its clients with a wide variety of investment banking, brokerage and related services. LAM and its affiliates provide investment management services to client discretionary accounts with assets totaling approximately $[71.1] billion as of [December 31, 2000]. Each Portfolio's primary portfolio managers are Herbert W. Gullquist and John R. Reinsberg. Mr. Gullquist has been Vice Chairman of Lazard since 1997 and Chief Investment Officer and a Managing Director of LAM since November 1982, when he joined Lazard. Mr. Reinsberg has been a Managing Director since joining Lazard in January 1992. PURCHASE AND REDEMPTION PROCEDURES, DISTRIBUTIONS, AND SHAREHOLDER SERVICES. The purchase and redemption procedures, dividend and distribution policies and shareholder services of each Portfolio with respect to each corresponding class of shares are identical. See "Shareholder Information" in the Fund's Prospectus for a complete discussion. DISTRIBUTION AND SERVICING (12b-1) PLAN. The Fund, on behalf of each Portfolio, has adopted a Distribution and Servicing Plan pursuant to Rule 12b-1 (the "Plan") under the 1940 Act with respect to the Fund's Open Shares. The Plan is identical as to each Portfolio. Under the Plan, the Fund pays Lazard, its distributor, for distribution and servicing provided to holders of Open Shares, a fee at the annual rate of .25% of the average daily net assets of each Portfolio's Open Shares. Because these fees are paid out of each Portfolio's assets on an on-going basis, over time these recurring fees will increase the cost of your investment and may cost more than paying other types of sales charges. REASONS FOR THE EXCHANGE The Fund's Board members have concluded that the Exchange is in the best interests of each Portfolio and its shareholders. The Board believes that the Exchange will permit shareholders to pursue the same investment objective in a larger fund without diluting shareholders' interests. As of September 28, 2001, Global Equity Portfolio and International Equity Portfolio had assets under management of approximately $82.9 million and $2.2 billion, respectively. The expense ratio of International Equity Portfolio is lower than that of Global Equity Portfolio. By combining Global Equity Portfolio with International Equity Portfolio, Global Equity Portfolio shareholders should obtain the benefits of economies of scale, which may result in lower overall expense ratios by spreading the fixed costs of fund operations over a larger asset base. In determining whether to recommend approval of the Exchange, the Board considered the following factors, among others: (1) the compatibility of each Portfolio's investment objective, management policies and investment restrictions, as well as shareholder -9- services offered by each Portfolio; (2) the amount of each Portfolio's assets under management and Global Equity Portfolio's inability to attract and retain sufficient assets to operate efficiently; (3) the terms and conditions of the Exchange and their conclusion that the Exchange would not result in dilution of shareholder interests; (4) expense ratios and information regarding the fees and expenses of each Portfolio, as well as the published expense ratios of similar funds and the estimated expense ratio of the combined Portfolio; (5) the tax-free nature of the Exchange; and (6) the estimated costs to be incurred by each Portfolio as a result of the Exchange. INFORMATION ABOUT THE EXCHANGE PLAN OF EXCHANGE. The following summary of the Plan is qualified in its entirety by reference to the Plan attached hereto as Appendix A. The Plan provides that International Equity Portfolio will acquire all of the assets of Global Equity Portfolio, in exchange for International Equity Portfolio shares, and assume Global Equity Portfolio's liabilities on the Closing Date. The number of each class of International Equity Portfolio shares to be issued to Global Equity Portfolio will be determined on the basis of the relative net asset values per share, computed as of the close of trading on the floor of the New York Stock Exchange (normally 4:00 p.m., Eastern time), except for options on stock and stock indices traded on national securities exchange, if any, which are valued as of the close of options trading on such exchanges (normally 4:10, Eastern time), on the Closing Date (the "Valuation Time"). Portfolio securities of each Portfolio will be valued in accordance with the valuation practices of International Equity Portfolio (the same as those for Global Equity Portfolio), which are described under the caption "Shareholder Information--General" in the Fund's Prospectus and under the caption "Determination of Net Asset Value" in the Fund's Statement of Additional Information. Before the Closing Date, Global Equity Portfolio will declare a dividend or other distribution which, together with all previous dividends and other distributions, will have the effect of distributing to Global Equity Portfolio shareholders all of Global Equity Portfolio's previously undistributed investment company taxable income (computed without regard to any deduction for dividends paid) and all of its net capital gains realized in the taxable year ending on or prior to the Closing Date (after reduction for any capital loss carryforward). As conveniently as practicable after the Closing Date, Global Equity Portfolio will distribute pro rata to its Institutional Class and Open Class shareholders of record as of the Valuation Time, in liquidation of Global Equity Portfolio, Institutional Shares and Open Shares, respectively, of International Equity Portfolio received by it in the Exchange. Such distribution will be accomplished by establishing an account on the share records of International Equity Portfolio in the name of each Global Equity Portfolio shareholder, each account representing the respective pro rata number of International Equity Portfolio shares due to each Global Equity Portfolio shareholder. After such distribution and the winding up of its affairs, Global Equity Portfolio will be terminated as a series of the Fund. The Plan may be amended at any time prior to the Exchange. Global Equity Portfolio will provide its shareholders with information describing any material amendment to the Plan prior to the Exchange. The obligations of each Portfolio under the Plan are subject to various conditions, including approval by the requisite number of Global Equity Portfolio shares -10- and the continuing accuracy of various representations and warranties of each Portfolio being confirmed by the respective parties. The total expenses of the Exchange are expected to be approximately $_______ and will be borne pro rata according to the aggregate net assets of each Portfolio. If the Exchange does not occur, the Fund's Board will consider other appropriate courses of action. FEDERAL INCOME TAX CONSEQUENCES. The exchange of Global Equity Portfolio's assets for International Equity Portfolio shares is intended to qualify for federal income tax purposes as a tax-free reorganization under Section 368(a) of the Internal Revenue Code of 1986, as amended (the "Code"). As a condition to the closing of the Exchange, each Portfolio will receive an opinion of Stroock & Stroock & Lavan LLP, counsel to the Fund, substantially to the effect that, on the basis of the existing provisions of the Code, Treasury regulations issued thereunder, current administrative regulations and pronouncements and court decisions, and certain facts, assumptions and representations, for federal income tax purposes: (1) the transfer of all of Global Equity Portfolio's assets in exchange for International Equity Portfolio shares and the assumption by International Equity Portfolio of Global Equity Portfolio's liabilities will constitute a "reorganization" within the meaning of Section 368(a)(1)(C) of the Code; (2) no gain or loss will be recognized by Global Equity Portfolio upon the transfer of its assets to International Equity Portfolio solely in exchange for International Equity Portfolio shares and the assumption by International Equity Portfolio of Global Equity Portfolio's liabilities or upon the distribution (whether actual or constructive) of International Equity Portfolio shares to Global Equity Portfolio shareholders in exchange for their Global Equity Portfolio shares; (3) no gain or loss will be recognized by International Equity Portfolio upon the receipt of Global Equity Portfolio's assets solely in exchange for International Equity Portfolio shares and the assumption by International Equity Portfolio of Global Equity Portfolio's liabilities; (4) no gain or loss will be recognized by Global Equity Portfolio shareholders upon the exchange of Global Equity Portfolio shares for International Equity Portfolio shares; (5) the aggregate tax basis for International Equity Portfolio shares received by each Global Equity Portfolio shareholder pursuant to the Exchange will be the same as the aggregate tax basis for Global Equity Portfolio shares held by such shareholder immediately prior to the Exchange, and the holding period of International Equity Portfolio shares to be received by each Global Equity Portfolio shareholder will include the period during which Global Equity Portfolio shares surrendered in exchange therefor were held by such shareholder (provided Global Equity Portfolio shares were held as capital assets on the date of the Exchange); and (6) the tax basis of Global Equity Portfolio's assets acquired by International Equity Portfolio will be the same as the tax basis of such assets to Global Equity Portfolio immediately prior to the Exchange, and the holding period of Global Equity Portfolio's assets in the hands of International Equity Portfolio will include the period during which those assets were held by Global Equity Portfolio. No opinion will be expressed as to the effect of the reorganization on (1) Global Equity Portfolio or International Equity Portfolio with respect to any asset as to which any unrealized gain or loss is required to be recognized for federal income tax purposes at the end of a taxable year (or on the termination or transfer thereof) under a mark-to-market system of -11- accounting, and (2) any Global Equity Portfolio shareholder that is required to recognize unrealized gains and losses for federal income tax purposes under a mark-to-market system of accounting. NEITHER PORTFOLIO HAS SOUGHT A TAX RULING FROM THE INTERNAL REVENUE SERVICE ("IRS"). THE OPINION OF COUNSEL IS NOT BINDING ON THE IRS NOR DOES IT PRECLUDE THE IRS FROM ADOPTING A CONTRARY POSITION. Global Equity Portfolio shareholders should consult their tax advisers regarding the effect, if any, of the proposed Exchange in light of their individual circumstances. Since the foregoing discussion relates only to the federal income tax consequences of the Exchange, Global Equity Portfolio shareholders also should consult their tax advisers as to state and local tax consequences, if any, of the Exchange. REQUIRED VOTE. Approval of the proposal requires the approval of a majority of the Fund's Directors and also of a "majority of the outstanding voting securities" (as defined in the 1940 Act) of Global Equity Portfolio, which means the lesser of (1) 67% or more of the shares of the Portfolio present at a meeting, if the holders of more than 50% of the outstanding shares of the Portfolio are present or represented by proxy, or (2) more than 50% of the outstanding shares of the Portfolio. Global Equity Portfolio shareholders are entitled to one vote for each full share held, with fractional votes for fractional shares held, and separate classes vote together as one group on matters, such as the proposal, that affect classes equally. Global Equity Portfolio shares represented by executed and unrevoked proxies will be voted in accordance with the specifications made thereon. If the enclosed form of proxy is executed and returned, it nevertheless may be revoked if such revocation is received before the meeting. Also, any shareholder who attends the meeting in person may vote by ballot at the meeting, thereby canceling any proxy previously given. As of November 9, 2001, there were ___________ shares of record of Global Equity Portfolio entitled to vote. You should be aware that one shareholder of Global Equity Portfolio owns a sufficient amount of the Portfolio's outstanding voting securities to approve the proposed Exchange and has indicated that it will vote in favor of the Exchange. Consequently, no further shareholder action is required in order to authorize adoption of the proposal. ADDITIONAL INFORMATION ABOUT EACH PORTFOLIO Information about the Portfolios is incorporated by reference into this Prospectus/Proxy Statement from the Fund's Prospectus and Statement of Additional Information, each dated May 1, 2001, forming a part of its Registration Statement on Form N-1A (File No. 33-40682). Each Portfolio is subject to the requirements of the 1940 Act, and the Fund files reports, proxy and information statements and other information with the Commission. Reports, proxy and information statements and other information filed by the Fund may be inspected and copied at the Public Reference Facilities of the Commission at 450 Fifth Street, N.W., Washington, D.C. 20549. Copies of such material also can be obtained from the Public Reference Branch, Office of Consumer Affairs and Information Services, Securities and -12- Exchange Commission, Washington, D.C. 20549 (or by e-mail to publicinfo@sec.gov), at prescribed rates. CAPITALIZATION. Each Portfolio has classified its shares into two classes--Institutional Shares and Open Shares. The following table sets forth as of December 31, 2000 (1) the capitalization of each class of Global Equity Portfolio, (2) the capitalization of each class of International Equity Portfolio, and (3) the pro forma capitalization of International Equity Portfolio, as adjusted showing the effect of the Exchange had it occurred on such date.
PRO FORMA AFTER EXCHANGE GLOBAL EQUITY INTERNATIONAL EQUITY INTERNATIONAL EQUITY PORTFOLIO PORTFOLIO PORTFOLIO --------------------------- ------------------------------- ------------------------------- INSTITUTIONAL OPEN INSTITUTIONAL OPEN INSTITUTIONAL OPEN SHARES SHARES SHARES SHARES SHARES SHARES ------------- ---------- -------------- ------------ -------------- ------------ Total net assets $104,787,092 $4,587,555 $3,001,933,106 $147,226,394 $3,106,720,198 $151,813,948 Net asset value per share $ 12.41 $ 12.42 $ 13.46 $ 13.41 $ 13.46 $ 13.41 Shares outstanding 8,445,174 369,340 223,094,242 10,976,004 230,879,316 11,318,104
As of November 9, 2001, the following shareholders were known by Global Equity Portfolio to own of record 5% or more of the outstanding voting shares of the indicated class of Global Equity Portfolio: Name and Address Global Equity Portfolio ---------------- --------------------------------------------- Percentage of Shares Outstanding ------------------------- Before After Number of Shares Exchange Exchange ---------------- -------- -------- Institutional Class ------------------- Open Class ---------- As of November 9, 2001, the following shareholders were known by International Equity Portfolio to own of record 5% or more of the outstanding voting shares of the indicated class of International Equity Portfolio: -13- Name and Address International Equity Portfolio ---------------- --------------------------------------------- Percentage of Shares Outstanding ------------------------- Before After Number of Shares Exchange Exchange ---------------- -------- -------- Institutional Class ------------------- Open Class ---------- A shareholder who beneficially owns, directly or indirectly, more than 25% of a Portfolio's voting securities may be deemed a "control person" (as defined in the 1940 Act) of that Portfolio. [As of November 9, 2001 Board members and officers of the Fund, as a group, owned less than 1% of each of Global Equity Portfolio's and International Equity Portfolio's outstanding shares.] VOTING INFORMATION If a proxy is properly executed and returned accompanied by instructions to withhold authority to vote (a broker "non-vote"--a proxy from a broker or nominee indicating that such person has not received instructions from the beneficial owner or other person entitled to vote Global Equity Portfolio shares on a particular matter with respect to which the broker or nominee does not have discretionary power) or if a proxy is marked with an abstention (collectively, "abstentions"), Global Equity Portfolio shares represented thereby will be considered to be present at the meeting for purposes of determining the existence of a quorum for the transaction of business. Abstentions will not constitute a vote "for" or "against" a matter and will be disregarded in determining the "votes cast" on an issue. For this reason, abstentions will have the effect of a "no" vote for the purpose of obtaining requisite approval for the proposal. If a quorum is not present at the meeting, or if a quorum is present but sufficient votes to approve the proposal are not received, the persons named as proxies may propose one or more adjournments of the meeting after considering the nature of the proposal, the percentage of votes and negative votes actually cast, and the information to be provided to shareholders with respect to the reasons for the solicitation. Any adjournment will require the affirmative vote of a majority of those shares affected by the adjournment that are represented at the meeting in person or by proxy. If a quorum is present, the persons named as proxies will vote those proxies which they are entitled to vote "for" the Proposal in favor of such adjournment, and will vote those proxies required to be voted "against" the Proposal against any adjournment. A quorum is constituted with respect to Global Equity Portfolio by the presence in person or by proxy of the -14- holders of more than one-third of the outstanding Global Equity Portfolio shares entitled to vote at the meeting. FINANCIAL STATEMENTS AND EXPERTS The audited financial statements of Global Equity Portfolio and International Equity Portfolio for the fiscal year ended December 31, 2000 have been incorporated herein by reference in reliance upon the authority of the report given by Anchin, Block & Anchin LLP, the Fund's independent auditors. OTHER MATTERS The Fund's Board members are not aware of any other matters which may come before the Special Meeting of Shareholders. However, should any such matters properly come before the meeting, it is the intention of the persons named in the accompanying form of proxy to vote the proxy in accordance with their judgment on such matters. NOTICE TO BANKS, BROKER/DEALERS AND THEIR NOMINEES Please advise Global Equity Portfolio, in care of the Fund, 30 Rockefeller Plaza, 49th Floor, New York, New York 10112, Attention: Mutual Fund Servicing Department, whether other persons are the beneficial owners of Global Equity Portfolio shares and, if so, the number of copies of this Prospectus/Proxy Statement and other material you wish to receive in order to supply copies to the beneficial owners of such shares. -15- APPENDIX A AGREEMENT AND PLAN OF REORGANIZATION AGREEMENT AND PLAN OF REORGANIZATION dated as of October 24, 2001 (the "Agreement"), between THE LAZARD FUNDS, INC., a Maryland corporation (the "Fund"), on behalf of its Lazard Global Equity Portfolio ("Global Equity Portfolio"), and the Fund, on behalf of its Lazard International Equity Portfolio ("International Equity Portfolio" and, together with Global Equity Portfolio, the "Portfolios"). This Agreement is intended to be and is adopted as a plan of reorganization and liquidation within the meaning of Section 368(a)(1)(C) of the Internal Revenue Code of 1986, as amended (the "Code"). The reorganization (the "Reorganization") will consist of the transfer of all of the assets of Global Equity Portfolio, attributable to such Portfolio's Institutional Shares and Open Shares, in exchange solely for Institutional Shares and Open Shares, respectively, of common stock, par value $.001 per share, of International Equity Portfolio (collectively, "International Equity Portfolio Shares"), and the assumption by International Equity Portfolio of the liabilities of Global Equity Portfolio, attributable to its Institutional Shares and Open Shares, and the distribution of International Equity Portfolio Shares to the shareholders of Global Equity Portfolio in liquidation of Global Equity Portfolio as provided herein, all upon the terms and conditions hereinafter set forth in this Agreement. WHEREAS, each Portfolio is a series of the Fund, which is a registered, open-end management investment company; WHEREAS, Global Equity Portfolio owns securities which are assets of the character in which International Equity Portfolio is permitted to invest; WHEREAS, both Global Equity Portfolio and International Equity Portfolio are authorized to issue their respective Institutional Shares and Open Shares of capital stock; and WHEREAS, the Fund's Board has determined that the exchange of all of the assets and the liabilities of Global Equity Portfolio for International Equity Portfolio Shares is in the best interests of Global Equity Portfolio and International Equity Portfolio and their respective shareholders and that the interests of their respective existing shareholders would not be diluted as a result of this transaction: NOW THEREFORE, in consideration of the premises and of the covenants and agreements hereinafter set forth, the parties agree as follows: 1. TRANSFER OF ASSETS OF GLOBAL EQUITY PORTFOLIO IN EXCHANGE FOR INTERNATIONAL EQUITY PORTFOLIO SHARES AND ASSUMPTION OF GLOBAL EQUITY PORTFOLIO LIABILITIES AND LIQUIDATION OF GLOBAL EQUITY PORTFOLIO. A-1 1.1. Subject to the terms and conditions contained herein, Global Equity Portfolio agrees to assign, transfer and convey to International Equity Portfolio all of the assets of Global Equity Portfolio, including all securities and cash (subject to liabilities), attributable to its Institutional Shares and Open Shares, and International Equity Portfolio agrees in exchange therefor (a) to deliver to Global Equity Portfolio the number of International Equity Portfolio Institutional Shares and Open Shares, respectively, including fractional shares, determined as set forth in paragraph 2.3; and (b) to assume the liabilities of Global Equity Portfolio, attributable to its Institutional Shares and Open Shares, as set forth in paragraph 1.2. Such transactions shall take place at the closing (the "Closing") on the closing date (the "Closing Date") provided for in paragraph 3.1. In lieu of delivering certificates for International Equity Portfolio Shares, International Equity Portfolio shall credit International Equity Portfolio Shares to Global Equity Portfolio's account on the books of International Equity Portfolio and shall deliver a confirmation thereof to Global Equity Portfolio. 1.2. Global Equity Portfolio will endeavor to discharge all of its known liabilities and obligations prior to the Closing Date. International Equity Portfolio shall assume all liabilities, expenses, costs, charges and reserves, attributable to Global Equity Portfolio's Institutional Shares and Open Shares, reflected on an unaudited statement of assets and liabilities of Global Equity Portfolio prepared by Lazard Asset Management, as of the Valuation Time (as defined in paragraph 2.1), in accordance with generally accepted accounting principles in the United States of America consistently applied from the prior audited period. International Equity Portfolio shall assume only those liabilities of Global Equity Portfolio reflected in that unaudited statement of assets and liabilities and shall not assume any other liabilities, whether absolute or contingent. 1.3. Delivery of the assets of Global Equity Portfolio to be transferred shall be made on the Closing Date and shall be delivered to State Street Corporation, 225 Franklin Street, Boston, Massachusetts 02110, the Fund's custodian (the "Custodian"), for the account of International Equity Portfolio, with all securities not in bearer or book-entry form duly endorsed, or accompanied by duly executed separate assignments or stock powers, in proper form for transfer, with signatures guaranteed, and with all necessary stock transfer stamps, sufficient to transfer good and marketable title thereto (including all accrued interest and rights pertaining thereto) to the Custodian for the account of International Equity Portfolio free and clear of all liens, encumbrances, rights, restrictions and claims. All cash delivered shall be in the form of immediately available funds payable to the order of the Custodian for the account of International Equity Portfolio. 1.4. Global Equity Portfolio will pay or cause to be paid to International Equity Portfolio any interest received on or after the Closing Date with respect to assets transferred to International Equity Portfolio hereunder. Global Equity Portfolio will transfer to International Equity Portfolio any distributions, rights or other assets received by Global Equity Portfolio after the Closing Date as distributions on or with respect to the securities transferred. Such assets shall be deemed included in assets transferred to International Equity Portfolio on the Closing Date and shall not be separately valued. A-2 1.5. As soon after the Closing Date as is conveniently practicable (the "Liquidation Date"), Global Equity Portfolio will liquidate and distribute pro rata to Global Equity Portfolio's Institutional Class and Open Class shareholders of record, determined as of the Valuation Time (collectively, the "Global Equity Portfolio Shareholders"), the Institutional Shares and Open Shares, respectively, of International Equity Portfolio received by Global Equity Portfolio pursuant to paragraph 1.1. Such liquidation and distribution will be accomplished by the transfer of the applicable class of International Equity Portfolio Shares then credited to the account of Global Equity Portfolio on the records of International Equity Portfolio to open accounts on the share records of International Equity Portfolio in the names of Global Equity Portfolio shareholders and representing the respective pro rata number of the applicable class of International Equity Portfolio Shares due such shareholders. All issued and outstanding shares of Global Equity Portfolio simultaneously will be canceled on the records of Global Equity Portfolio. 1.6. Ownership of International Equity Portfolio Shares will be shown on the records of International Equity Portfolio's transfer agent. Shares of International Equity Portfolio will be issued in the manner described in the Fund's current prospectus and statement of additional information. 1.7. Any transfer taxes payable upon issuance of International Equity Portfolio Shares in a name other than the registered holder of International Equity Portfolio shares on the records of Global Equity Portfolio as of that time shall, as a condition of such issuance and transfer, be paid by the person to whom such International Equity Portfolio Shares are to be issued and transferred. 1.8. Any reporting responsibility of Global Equity Portfolio is and shall remain the responsibility of Global Equity Portfolio up to and including the Closing Date and such later date on which Global Equity Portfolio's existence is terminated as a series of the Fund. 2. VALUATION. 2.1. The value of Global Equity Portfolio's assets to be acquired by International Equity Portfolio hereunder shall be the value of such assets computed as of the close of trading on the floor of the New York Stock Exchange (normally 4:00 p.m., Eastern time), except that options and options on stock indices traded on national securities exchanges, if any, which are valued as of the close of options trading on such exchanges (normally 4:10 p.m., Eastern time), on the Closing Date (such time and date being hereinafter called the "Valuation Time"), using the valuation procedures set forth in the Fund's Articles of Incorporation, as the same may have been amended (the "Fund's Articles of Incorporation"), and then-current prospectus or statement of additional information. 2.2. The net asset value of an International Equity Portfolio Share shall be the net asset value per share computed as of the Valuation Time, using the valuation procedures set forth in the Fund's Articles of Incorporation and then-current prospectus or statement of additional information. A-3 2.3. The number of Institutional Shares and Open Shares of International Equity Portfolio to be issued (including fractional shares, if any) in exchange for Global Equity Portfolio's net assets attributable to Global Equity Portfolio's Institutional Shares and Open Shares, respectively, shall be determined by dividing the value of the net assets of the applicable class of Global Equity Portfolio determined using the same valuation procedures referred to in paragraph 2.1 by the net asset value of one International Equity Portfolio Share of the corresponding class determined in accordance with paragraph 2.2. 2.4. All computations of value shall be made in accordance with the regular practices of the Fund. 3. CLOSING AND CLOSING DATE. 3.1. The Closing Date shall be December 14, 2001 or such later date as the parties may mutually agree. All acts taking place at the Closing shall be deemed to take place simultaneously as of the close of business on the Closing Date unless otherwise provided. The Closing shall be held at 5:00 p.m., Eastern time, at the offices of The Lazard Funds, Inc., 30 Rockefeller Plaza, New York, New York, or such other time and/or place as the parties may mutually agree. 3.2. Global Equity Portfolio's portfolio securities, cash and any other assets shall be presented for examination to International Equity Portfolio prior to the Closing Date and shall be delivered in proper form to International Equity Portfolio. 3.3. If at the Valuation Time (a) the New York Stock Exchange or another primary trading market for portfolio securities of either Portfolio shall be closed to trading or trading thereon shall be restricted; or (b) trading or the reporting of trading on said Exchange or elsewhere shall be disrupted so that accurate appraisal of the value of the net assets of either Portfolio is impracticable, the Closing Date shall be postponed until the first business day after the day when trading shall have been fully resumed and reporting shall have been restored. 3.4. The transfer agent for Global Equity Portfolio shall deliver at the Closing a certificate of an authorized officer stating that its records contain the names and addresses of Global Equity Portfolio shareholders and the number and percentage ownership of outstanding Institutional Shares and Open Shares of Global Equity Portfolio owned by each such shareholder immediately prior to the Closing. International Equity Portfolio shall issue and deliver a confirmation evidencing International Equity Portfolio Shares to be credited on the Closing Date to the Fund's Secretary, or provide evidence satisfactory to Global Equity Portfolio that such International Equity Portfolio Shares have been credited to Global Equity Portfolio's account on the books of International Equity Portfolio. At the Closing, each party shall deliver to the other such bills of sale, checks, assignments, receipts or other documents as such other party or its counsel may reasonably request. A-4 4. REPRESENTATIONS AND WARRANTIES. 4.1. Global Equity Portfolio represents and warrants to International Equity Portfolio as follows: (a) Global Equity Portfolio is a series of the Fund, a corporation duly organized and validly existing and in good standing under the laws of the State of Maryland, and has the power to own all its properties and assets and to carry out this Agreement. (b) The Fund is registered under the Investment Company Act of 1940, as amended (the "1940 Act"), as an open-end management investment company and such registration has not been revoked or rescinded and is in full force and effect. (c) Global Equity Portfolio is not, and the execution, delivery and performance of this Agreement will not result, in material violation of the Fund's Articles of Incorporation or its Bylaws or of any agreement, indenture, instrument, contract, lease or other undertaking to which Global Equity Portfolio is a party or by which it is bound. (d) Global Equity Portfolio has no material contracts or other commitments outstanding (other than this Agreement) which will be terminated with liability to it on or prior to the Closing Date. (e) No litigation or administrative proceeding or investigation of or before any court or governmental body is currently pending or to its knowledge threatened against Global Equity Portfolio or any of its properties or assets which, if adversely determined, would materially and adversely affect its financial condition or the conduct of its business. Global Equity Portfolio knows of no facts which might form the basis for the institution of such proceedings, and is not a party to or subject to the provisions of any order, decree or judgment of any court or governmental body which materially and adversely affects its business or its ability to consummate the transactions herein contemplated. (f) The Statement of Assets and Liabilities of Global Equity Portfolio for the fiscal year ended December 31, 2000 has been audited by Anchin, Block & Anchin LLP, independent auditors, and is in accordance with generally accepted accounting principles in the United States of America, consistently applied, and such statement (copies of which have been furnished to International Equity Portfolio) fairly reflects the financial condition of Global Equity Portfolio as of such date, and there are no known contingent liabilities of Global Equity Portfolio as of such date not disclosed therein. (g) Since December 31, 2000, there has not been any material adverse change in Global Equity Portfolio's financial condition, assets, liabilities or business other than changes occurring in the ordinary course of business, or any incurrence by Global Equity Portfolio of indebtedness maturing more than one year from the date such indebtedness was incurred, except as disclosed on the statement of assets and liabilities referred to in Section 1.2 hereof. A-5 (h) At the Closing Date, all federal and other tax returns and reports of Global Equity Portfolio required by law then to be filed shall have been filed, and all federal and other taxes shall have been paid so far as due, or provision shall have been made for the payment thereof, and to the best of Global Equity Portfolio's knowledge no such return is currently under audit and no assessment has been asserted with respect to such returns. (i) For each fiscal year of its operation, Global Equity Portfolio has met the requirements of Subchapter M of the Code for qualification and treatment as a regulated investment company. (j) All issued and outstanding shares of each class of Global Equity Portfolio are, and at the Closing Date will be, duly and validly issued and outstanding, fully paid and non-assessable. All of the issued and outstanding shares of each class of Global Equity Portfolio will, at the time of Closing, be held by the persons and in the amounts set forth in the records of the transfer agent as provided in paragraph 3.4. Global Equity Portfolio does not have outstanding any options, warrants or other rights to subscribe for or purchase any of Global Equity Portfolio shares, nor is there outstanding any security convertible into any of Global Equity Portfolio shares. (k) On the Closing Date, Global Equity Portfolio will have full right, power and authority to sell, assign, transfer and deliver the assets to be transferred by it hereunder. (l) The execution, delivery and performance of this Agreement will have been duly authorized prior to the Closing Date by all necessary action on the part of the Fund's Board and, subject to the approval of Global Equity Portfolio Shareholders and assuming due execution and delivery hereof by International Equity Portfolio, this Agreement will constitute the valid and legally binding obligation of Global Equity Portfolio, enforceable in accordance with its terms, subject to the effect of bankruptcy, insolvency, reorganization, moratorium, fraudulent conveyance and other similar laws relating to or affecting creditors' rights generally and court decisions with respect thereto, and to general principles of equity and the discretion of the court (regardless of whether the enforceability is considered in a proceeding in equity or at law). (m) The proxy statement pertaining to Global Equity Portfolio (the "Proxy Statement") included in the Fund's Registration Statement referred to in paragraph 5.5 (other than information therein that has been furnished with respect to International Equity Portfolio) will, on the effective date of the Registration Statement and on the Closing Date, not contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which such statements were made, not materially misleading. 4.2. International Equity Portfolio represents and warrants to Global Equity Portfolio as follows: A-6 (a) International Equity Portfolio is a series of the Fund, a corporation duly organized, validly existing and in good standing under the laws of Maryland, and has power to carry on its business as it is now being conducted and to carry out this Agreement. (b) The Fund is registered under the 1940 Act as an open-end management investment company and such registration has not been revoked or rescinded and is in full force and effect. (c) The current prospectus and statement of additional information of the Fund, with respect to International Equity Portfolio, conform in all material respects to the applicable requirements of the Securities Act of 1933, as amended (the "1933 Act"), and the 1940 Act and the rules and regulations of the Securities and Exchange Commission (the "SEC") thereunder and do not include any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not materially misleading. (d) International Equity Portfolio is not, and the execution, delivery and performance of this Agreement will not result, in material violation of the Fund's Articles of Incorporation or its Bylaws or of any agreement, indenture, instrument, contract, lease or other undertaking to which International Equity Portfolio is a party or by which it is bound. (e) No litigation or administrative proceeding or investigation of or before any court or governmental body is currently pending or to its knowledge threatened against International Equity Portfolio or any of its properties or assets which, if adversely determined, would materially and adversely affect its financial condition or the conduct of its business. International Equity Portfolio knows of no facts which might form the basis for the institution of such proceedings, and is not a party to or subject to the provisions of any order, decree or judgment of any court or governmental body which materially and adversely affects its business or its ability to consummate the transactions contemplated herein. (f) The Statement of Assets and Liabilities of International Equity Portfolio for the fiscal year ended December 31, 2000 has been audited by Anchin, Block & Anchin LLP, independent auditors, and is in accordance with generally accepted accounting principles in the United States of America, consistently applied, and such statement (copies of which have been furnished to Global Equity Portfolio) fairly reflects the financial condition of International Equity Portfolio as of such date. (g) Since December 31, 2000, there has not been any material adverse change in International Equity Portfolio's financial condition, assets, liabilities or business other than changes occurring in the ordinary course of business, or any incurrence by International Equity Portfolio of indebtedness maturing more than one year from the date such indebtedness was incurred, except as disclosed on the statement of assets and liabilities as of December 31, 2000 referred to in Section 4.2(f) hereof. (h) At the Closing Date, all federal and other tax returns and reports of International Equity Portfolio required by law then to be filed shall have been filed, and all A-7 federal and other taxes shown as due on said returns and reports shall have been paid or provision shall have been made for the payment thereof. (i) For each fiscal year of its operation, International Equity Portfolio has met the requirements of Subchapter M of the Code for qualification and treatment as a regulated investment company. (j) All issued and outstanding shares of each class of International Equity Portfolio are, and at the Closing Date will be, duly and validly issued and outstanding, fully paid and non-assessable. International Equity Portfolio does not have outstanding any options, warrants or other rights to subscribe for or purchase any of International Equity Portfolio Shares, nor is there outstanding any security convertible into any International Equity Portfolio Shares. (k) The execution, delivery and performance of this Agreement will have been duly authorized prior to the Closing Date by all necessary action, if any, on the part of the Fund's Board and, subject to the approval of Global Equity Portfolio shareholders and assuming due execution and delivery hereof by Global Equity Portfolio, this Agreement will constitute the valid and legally binding obligation of International Equity Portfolio enforceable in accordance with its terms, subject to the effect of bankruptcy, insolvency, reorganization, moratorium, fraudulent conveyance and other similar laws relating to or affecting creditors' rights generally and court decisions with respect thereto, and to general principles of equity and the discretion of the court (regardless of whether the enforceability is considered in a proceeding in equity or at law). (l) The Registration Statement (only insofar as it relates to International Equity Portfolio and is based on information furnished with respect to International Equity Portfolio) will, on the effective date of the Registration Statement and on the Closing Date, not contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which such statements were made, not materially misleading. 5. COVENANTS OF THE PORTFOLIOS. 5.1. Each Portfolio will operate its business in the ordinary course between the date hereof and the Closing Date, it being understood that such ordinary course of business will include payment of customary dividends and distributions. 5.2. Global Equity Portfolio will call a meeting of its shareholders to consider and act upon this Agreement and to take all other action necessary to obtain approval of the transactions contemplated herein. 5.3. Subject to the provisions of this Agreement, each Portfolio will take, or cause to be taken, all action, and do or cause to be done, all things reasonably necessary, proper or advisable to consummate and make effective the transactions contemplated by this Agreement. A-8 5.4. As promptly as practicable, but in any case within sixty days after the Closing Date, Global Equity Portfolio shall furnish International Equity Portfolio, in such form as is reasonably satisfactory to International Equity Portfolio, a statement of the earnings and profits of Global Equity Portfolio for federal income tax purposes which will be carried over to International Equity Portfolio as a result of Section 381 of the Code and which will be certified by the Fund's President or its Vice President and its Treasurer. 5.5. Global Equity Portfolio will provide the Fund with information reasonably necessary for the preparation of a prospectus (the "Prospectus") which will include the Proxy Statement, referred to in paragraph 4.1(m), all to be included in a Registration Statement on Form N-14 of the Fund (the "Registration Statement"), in compliance with the 1933 Act, the Securities Exchange Act of 1934, as amended, and the 1940 Act in connection with the meeting of Global Equity Portfolio shareholders to consider approval of this Agreement and the transactions contemplated herein. 5.6. International Equity Portfolio agrees to use all reasonable efforts to obtain the approvals and authorizations required by the 1933 Act, the 1940 Act and such of the state Blue Sky or securities laws as it may deem appropriate in order to continue its operations after the Closing Date. 6. CONDITIONS PRECEDENT TO OBLIGATIONS OF INTERNATIONAL EQUITY PORTFOLIO. The obligations of International Equity Portfolio to complete the transactions provided for herein shall be subject, at its election, to the performance by Global Equity Portfolio of all the obligations to be performed by it hereunder on or before the Closing Date and, in addition thereto, the following conditions: 6.1. All representations and warranties of Global Equity Portfolio contained in this Agreement shall be true and correct in all material respects as of the date hereof and, except as they may be affected by the transactions contemplated by this Agreement, as of the Closing Date with the same force and effect as if made on and as of the Closing Date. 6.2. Global Equity Portfolio shall have delivered to International Equity Portfolio a statement of the assets and liabilities, together with a list of Global Equity Portfolio's portfolio securities showing the tax basis of such securities by lot and the holding periods of such securities, as of the Closing Date, certified by the Fund's Treasurer. 6.3. Global Equity Portfolio shall have delivered to International Equity Portfolio on the Closing Date a certificate executed in its name by the Fund's President or its Vice President and its Treasurer, in form and substance satisfactory to International Equity Portfolio, to the effect that the representations and warranties of Global Equity Portfolio made in this Agreement are true and correct at and as of the Closing Date, except as they may be affected by the transactions contemplated by this Agreement, and as to such other matters as International Equity Portfolio shall reasonably request. A-9 7. CONDITIONS PRECEDENT TO OBLIGATIONS OF GLOBAL EQUITY PORTFOLIO. The obligations of Global Equity Portfolio to complete the transactions provided for herein shall be subject, at its election, to the performance by International Equity Portfolio of all the obligations to be performed by it hereunder on or before the Closing Date and, in addition thereto, the following conditions: 7.1. All representations and warranties of International Equity Portfolio contained in this Agreement shall be true and correct in all material respects as of the date hereof and, except as they may be affected by the transactions contemplated by this Agreement, as of the Closing Date with the same force and effect as if made on and as of the Closing Date. 7.2. International Equity Portfolio shall have delivered to Global Equity Portfolio on the Closing Date a certificate executed in its name by the Fund's President or its Vice President and its Treasurer, in form and substance reasonably satisfactory to Global Equity Portfolio, to the effect that the representations and warranties of International Equity Portfolio made in this Agreement are true and correct at and as of the Closing Date, except as they may be affected by the transactions contemplated by this Agreement, and as to such other matters as Global Equity Portfolio shall reasonably request. 8. FURTHER CONDITIONS PRECEDENT TO OBLIGATIONS OF EACH PORTFOLIO. If any of the conditions set forth below do not exist on or before the Closing Date with respect to either Portfolio, the other party to this Agreement shall, at its option, not be required to complete the transactions contemplated by this Agreement. 8.1. This Agreement and the transactions contemplated herein shall have been approved by the requisite vote of the holders of the outstanding shares of Global Equity Portfolio in accordance with the provisions of the Fund's Articles of Incorporation. 8.2. On the Closing Date, no action, suit or other proceeding shall be pending before any court or governmental agency in which it is sought to restrain or prohibit, or obtain damages or other relief in connection with, this Agreement or the transactions contemplated herein. 8.3. All consents of other parties and all other consents, orders and permits of federal, state and local regulatory authorities (including those of the SEC and of state Blue Sky and securities authorities) deemed necessary by either Portfolio to permit consummation, in all material respects, of the transactions contemplated hereby shall have been obtained, except where failure to obtain any such consent, order or permit would not involve a risk of a material adverse effect on the assets or properties of either Portfolio, provided that either party hereto may for itself waive any of such conditions. 8.4. The Registration Statement shall have become effective under the 1933 Act and no stop orders suspending the effectiveness thereof shall have been issued and, to the A-10 best knowledge of the parties hereto, no investigation or proceeding for that purpose shall have been instituted or be pending, threatened or contemplated under the 1933 Act. 8.5. Global Equity Portfolio shall have declared a dividend or other distribution which, together with all previous dividends and other distributions, shall have the effect of distributing to Global Equity Portfolio shareholders all of Global Equity Portfolio's investment company taxable income for all taxable years ending on or prior to the Closing Date (computed without regard to any deduction for dividends paid) and all of its net capital gain realized in all such taxable years (after reduction for any capital loss carryforward). 8.6. The parties shall have received an opinion of Stroock & Stroock & Lavan LLP substantially to the effect that for federal income tax purposes: (a) The transfer of all or substantially all of Global Equity Portfolio's assets in exchange for International Equity Portfolio Shares and the assumption by International Equity Portfolio of certain identified liabilities of Global Equity Portfolio will constitute a "reorganization" within the meaning of Section 368(a)(1)(C) of the Code; (b) No gain or loss will be recognized by International Equity Portfolio upon the receipt of the assets of Global Equity Portfolio solely in exchange for International Equity Portfolio Shares and the assumption by International Equity Portfolio of certain identified liabilities of Global Equity Portfolio; (c) No gain or loss will be recognized by Global Equity Portfolio upon the transfer of Global Equity Portfolio's assets to International Equity Portfolio solely in exchange for International Equity Portfolio Shares and the assumption by International Equity Portfolio of certain identified liabilities of Global Equity Portfolio or upon the distribution (whether actual or constructive) of International Equity Portfolio Shares to Global Equity Portfolio Shareholders in exchange for their shares of Global Equity Portfolio; (d) No gain or loss will be recognized by Global Equity Portfolio Shareholders upon the exchange of their Global Equity Portfolio shares for International Equity Portfolio Shares; (e) The aggregate tax basis for International Equity Portfolio Shares received by each Global Equity Portfolio shareholder pursuant to the Reorganization will be the same as the aggregate tax basis of Global Equity Portfolio shares held by such shareholder immediately prior to the Reorganization, and the holding period of International Equity Portfolio Shares to be received by each Global Equity Portfolio shareholder will include the period during which Global Equity Portfolio shares exchanged therefor were held by such shareholder (provided Global Equity Portfolio shares were held as capital assets on the date of the Reorganization); and (f) The tax basis of Global Equity Portfolio assets transferred to International Equity Portfolio will be the same as the tax basis of such assets to Global Equity Portfolio immediately prior to the Reorganization, and the holding period of the assets of Global Equity Portfolio in the hands of International Equity Portfolio will include the period during which those assets were held by Global Equity Portfolio. No opinion will be expressed as to the effect of the Reorganization on (i) Global Equity Portfolio or International Equity Portfolio with respect to any asset as to which any unrealized gain or loss is required to be recognized for federal income tax purposes at the end of a taxable year (or on the termination or transfer thereof) under a mark-to-market system of accounting, and (ii) any Global Equity Portfolio Shareholder that is required to recognize A-11 unrealized gains and losses for federal income tax purposes under a mark-to-market system of accounting. 9. TERMINATION OF AGREEMENT; EXPENSES. 9.1. This Agreement and the transaction contemplated hereby may be terminated and abandoned by resolution of the Board at any time prior to the Closing Date (and notwithstanding any vote of Global Equity Portfolio shareholders) if circumstances should develop that, in the opinion of the Board, make proceeding with the Agreement inadvisable. 9.2. If this Agreement is terminated and the transaction contemplated hereby is abandoned pursuant to the provisions of this Section 9, this Agreement shall become void and have no effect, without any liability on the part of any party hereto or the Board members, officers or shareholders of either Fund, in respect of this Agreement, except that the parties shall bear the aggregate expenses of the transaction contemplated hereby in proportion to their respective net assets as of the date this Agreement is terminated or the exchange contemplated hereby is abandoned. 9.3. Global Equity Portfolio and International Equity Portfolio shall bear the aggregate expenses of the transactions contemplated hereby in proportion to their respective net assets as of the Closing Date or, if this Agreement is terminated or the Reorganization contemplated hereby is abandoned prior to the Closing Date, as of the date of such termination or abandonment. 10. WAIVER. At any time prior to the Closing Date, any of the foregoing conditions may be waived by the Fund's Board if, in the judgment of the Fund's Board, such waiver will not have a material adverse effect on the benefits intended under this Agreement to the shareholders of the Portfolio. 11. MISCELLANEOUS. 11.1. None of the representations and warranties included or provided for herein shall survive consummation of the transactions contemplated hereby. 11.2. This Agreement contains the entire agreement and understanding between the parties hereto with respect to the subject matter hereof, and merges and supersedes all prior discussions, agreements and understandings of every kind and nature between them relating to the subject matter hereof. Neither party shall be bound by any condition, definition, warranty or representation, other than as set forth or provided in this Agreement or as may be, on or subsequent to the date hereof, set forth in a writing signed by the party to be bound thereby. 11.3. This Agreement shall be governed and construed in accordance with the internal laws of the State of New York, without giving effect to principles of conflict of laws; provided, however, that the due authorization, execution and delivery of this Agreement by International Equity Portfolio and Global Equity Portfolio shall be governed and construed in A-12 accordance with the internal laws of Maryland without giving effect to principles of conflict of laws. 11.4. This Agreement may be executed in counterparts, each of which, when executed and delivered, shall be deemed to be an original. 11.5. This Agreement shall bind and inure to the benefit of the parties hereto and their respective successors and assigns, but no assignment or transfer hereof or of any rights or obligations hereunder shall be made by any party without the written consent of the other party. Nothing herein expressed or implied is intended or shall be construed to confer upon or give any person, firm or corporation, other than the parties hereto and their respective successors and assigns, any rights or remedies under or by reason of this Agreement. 11.6. (a) Any references in this Agreement to actions taken, deliveries by or to, or representations and warranties made by or to, International Equity Portfolio shall be deemed references to actions taken, deliveries by or to, representations and warranties made by or to, the Fund on behalf of International Equity Portfolio. (b) Any references in this Agreement to actions taken, deliveries by or to, or representations and warranties made by or to, Global Equity Portfolio shall be deemed references to actions taken, deliveries by or to, representations and warranties made by or to, the Fund on behalf of Global Equity Portfolio. A-13 IN WITNESS WHEREOF, each Portfolio has caused this Agreement and Plan of Reorganization to be executed and attested on its behalf by its duly authorized representatives as of the date first above written. THE LAZARD FUNDS, INC. on behalf of its Lazard Global Equity Portfolio By: _____________________________ David M. Goldenberg, ATTEST: __________________________ Vice President and Secretary THE LAZARD FUNDS, INC. on behalf of its Lazard International Equity Portfolio By: _____________________________ David M. Goldenberg, ATTEST: __________________________ Vice President and Secretary A-14 LAZARD GLOBAL EQUITY PORTFOLIO SPECIAL MEETING OF SHAREHOLDERS - DECEMBER 12, 2001 Proxy Solicited on Behalf of Board of Directors The undersigned holder of shares of common stock of Lazard Global Equity Portfolio (the "Portfolio"), a series of The Lazard Funds, Inc., a Maryland corporation (the "Fund"), hereby appoints David M. Goldenberg and Bernard J. Grzelak, and each of them, with full power of substitution and revocation, as proxies to represent the undersigned at the Special Meeting of Shareholders of the Portfolio to be held at the offices of the Fund at 30 Rockefeller Plaza, 58th Floor, New York, New York 10112, on Wednesday, December 12, 2001, at 10:00 a.m., and at any and all adjournments thereof, and thereat to vote all shares of common stock of the Portfolio which the undersigned would be entitled to vote, with all powers the undersigned would possess if personally present, in accordance with the instructions on this proxy. Please mark the boxes in blue or black ink. 1. The undersigned hereby vote(s) as follows for the approval of an Agreement and Plan of Reorganization as described in the Prospectus/Proxy Statement for the Special Meeting of Shareholders. FOR /_/ AGAINST /_/ ABSTAIN /_/ 2. In their discretion, on such other matters as may properly come before the meeting and any adjournment thereof. THIS PROXY IS SOLICITED BY THE FUND'S BOARD OF DIRECTORS AND WILL BE VOTED FOR THE ABOVE PROPOSALS UNLESS OTHERWISE INDICATED. Dated: ________________________, 2001 _____________________________________ Signature _____________________________________ Signature BY SIGNING THIS PROXY CARD, RECEIPT OF THE ACCOMPANYING NOTICE OF SPECIAL MEETING OF SHAREHOLDERS AND PROSPECTUS/PROXY STATEMENT IS ACKNOWLEDGED. Please sign exactly as name or names appear on this proxy. If stock is held jointly, each holder should sign. If signing as attorney, trustee, executor, administrator, custodian, guardian or corporate officer, please give full title. THE LAZARD FUNDS, INC. PART B STATEMENT OF ADDITIONAL INFORMATION November 16, 2001 Transfer of the Assets of LAZARD GLOBAL EQUITY PORTFOLIO 30 Rockefeller Plaza New York, New York 10112 1-800-823-6300 To and in Exchange for Institutional Shares and Open Shares of LAZARD INTERNATIONAL EQUITY PORTFOLIO 30 Rockefeller Plaza New York, New York 10112 1-800-823-6300 This Statement of Additional Information, which is not a prospectus, supplements and should be read in conjunction with the Prospectus/Information Statement dated November 16, 2001, relating specifically to the proposed transfer of all of the assets and liabilities of Lazard Global Equity Portfolio, attributable to its Institutional Shares and Open Shares, in exchange for Institutional Shares and Open Shares, respectively, of Lazard International Equity Portfolio. The transfer is to occur pursuant to an Agreement and Plan of Reorganization. This Statement of Additional Information consists of this cover page and the following described documents, each of which is attached hereto and incorporated herein by reference: 1. Statement of Additional Information of The Lazard Funds, Inc. dated May 1, 2001. 2. Annual Report of The Lazard Funds, Inc. for the fiscal year ended December 31, 2000. 3. Semi-Annual Report of The Lazard Funds, Inc. for the Period Ended June 30, 2001. The Prospectus/Proxy Statement dated November 16, 2001 may be obtained by writing to The Lazard Funds, Inc., 30 Rockefeller Plaza, New York, New York 10112. B-1 THE LAZARD FUNDS, INC. 30 Rockefeller Plaza New York, New York 10112 (800) 823-6300 STATEMENT OF ADDITIONAL INFORMATION MAY 1, 2001 The Lazard Funds, Inc. (the "Fund") is a no-load, open-end management investment company known as a mutual fund. This Statement of Additional Information, which is not a prospectus, supplements and should be read in conjunction with the current Prospectus of the Fund, dated May 1, 2001, as it may be revised from time to time, relating to the following thirteen portfolios (individually, a "Portfolio" and collectively, the "Portfolios"): Lazard Equity Portfolio Lazard International Equity Select Portfolio Lazard Mid Cap Portfolio Lazard Bond Portfolio Lazard Small Cap Portfolio Lazard High Yield Portfolio Lazard Global Equity Portfolio Lazard International Fixed-Income Lazard International Equity Portfolio Portfolio Lazard International Small Cap Portfolio Lazard Strategic Yield Portfolio Lazard Emerging Markets Portfolio Lazard Mortgage Portfolio
Each Portfolio (other than the Mortgage Portfolio) currently offers two classes of shares--Institutional Shares and Open Shares. The Mortgage Portfolio only offers Institutional Shares. Institutional Shares and Open Shares are identical, except as to minimum investment requirements and the services offered to and expenses borne by each Class. To obtain a copy of the Fund's Prospectus, please write or call the Fund at the address and telephone number given above. The Fund's most recent Annual Report and Semi-Annual Report to Shareholders are separate documents supplied with this Statement of Additional Information, and the financial statements, accompanying notes and report of independent auditors appearing in the Annual Report are incorporated by reference into this Statement of Additional Information. TABLE OF CONTENTS Page ------------------------------------------------------------------------------- Description of the Fund and Portfolios...................................1 Investment Restrictions.................................................24 Management..............................................................28 Determination of Net Asset Value........................................36 Portfolio Transactions..................................................37 How to Buy and How to Sell Shares......................................40 Distribution and Servicing Plan (Open Shares Only)......................42 Dividends and Distributions.............................................44 Taxation................................................................44 Performance Information.................................................48 Information About the Fund and Portfolios...............................52 Counsel and Independent Auditors........................................63 Additional Information..................................................63 Appendix................................................................64 DESCRIPTION OF THE FUND AND PORTFOLIOS The Fund is a Maryland corporation organized on May 17, 1991. Each Portfolio is a separate portfolio of the Fund, an open-end management investment company, known as a mutual fund. Each Portfolio is a diversified investment company, which means that, with respect to 75% of its total assets, the Portfolio will not invest more than 5% of its assets in the securities of any single issuer nor hold more than 10% of the outstanding voting securities of any single issuer. Lazard Asset Management, a division of Lazard Freres & Co. LLC ("Lazard"), serves as the investment manager (the "Investment Manager") to each of the Portfolios. Lazard is the distributor of each Portfolio's shares. CERTAIN PORTFOLIO SECURITIES The following information supplements and should be read in conjunction with the Fund's Prospectus. DEPOSITARY RECEIPTS. (All Portfolios, except the Small Cap and Mortgage Portfolios) Each of these Portfolios may invest in the securities of foreign issuers in the form of American Depositary Receipts ("ADRs") and Global Depositary Receipts ("GDRs"). These securities may not necessarily be denominated in the same currency as the securities into which they may be converted. ADRs are receipts typically issued by a United States bank or trust company which evidence ownership of underlying securities issued by a foreign corporation. GDRs are receipts issued outside the United States, typically by non-United States banks and trust companies that evidence ownership of either foreign or domestic securities. Generally, ADRs in registered form are designed for use in the United States securities markets and GDRs in bearer form are designed for use outside the United States. These securities may be purchased through "sponsored" or "un-sponsored" facilities. A sponsored facility is established jointly by the issuer of the underlying security and a depositary. A depositary may establish an un-sponsored facility without participation by the issuer of the deposited security. Holders of un-sponsored depositary receipts generally bear all the costs of such facilities and the depositary of an un-sponsored facility frequently is under no obligation to distribute shareholder communications received from the issuer of the deposited security or to pass through voting rights to the holders of such receipts in respect of the deposited securities. FOREIGN GOVERNMENT OBLIGATIONS; SECURITIES OF SUPRANATIONAL ENTITIES. (All Portfolios, except the Small Cap and Mortgage Portfolios) Each of these Portfolios may invest in obligations issued or guaranteed by one or more foreign governments or any of their political subdivisions, agencies or instrumentalities that are determined by the Investment Manager to be of comparable quality to the other obligations in which the Portfolio may invest. Supranational entities include international organizations designated or supported by governmental entities to promote economic reconstruction or development and international banking institutions and related government agencies. Examples include the International Bank for Reconstruction and Development (the World Bank), the European Coal and Steel Community, the Asian Development Bank and the InterAmerican Development Bank. FOREIGN SECURITIES. (All Portfolios) Each Portfolio may invest in non-U.S. securities as described in the Fund's Prospectus. In addition, the Equity Portfolio may invest up to 15% of total assets in non-U.S. equity or debt securities that trade in U.S. markets, and the Mid Cap Portfolio may invest up to 15% of total assets in non-U.S. equity or debt securities. FIXED-INCOME SECURITIES. Each fixed-income Portfolio may invest in fixed-income securities as described in the Fund's Prospectus. In addition, the Equity Portfolio may invest up to 20% of its total assets in U.S. Government securities and investment grade debt obligations of U.S. corporations; the Mid Cap, Small Cap, International Small Cap and Global Equity Portfolios may each invest up to 20% of its total assets in investment grade debt securities; and the International Equity and International Equity Select Portfolios may each invest up to 20% of its total assets in investment grade fixed-income securities and short-term money market instruments. CONVERTIBLE SECURITIES. (All Portfolios, except the Mortgage Portfolio) Convertible securities may be converted at either a stated price or stated rate into underlying shares of common stock. Convertible securities have characteristics similar to both fixed-income and equity securities. Convertible securities generally are subordinated to other similar but non-convertible securities of the same issuer, although convertible bonds, as corporate debt obligations, enjoy seniority in right of payment to all equity securities, and convertible preferred stock is senior to common stock, of the same issuer. Because of the subordination feature, however, convertible securities typically have lower ratings than similar non-convertible securities. Although to a lesser extent than with fixed-income securities, the market value of convertible securities tends to decline as interest rates increase and, conversely, tends to increase as interest rates decline. In addition, because of the conversion feature, the market value of convertible securities tends to vary with fluctuations in the market value of the underlying common stock. A unique feature of convertible securities is that as the market price of the underlying common stock declines, convertible securities tend to trade increasingly on a yield basis, and so may not experience market value declines to the same extent as the underlying common stock. When the market price of the underlying common stock increases, the prices of the convertible securities tend to rise as a reflection of the value of the underlying common stock. While no securities investments are without risk, investments in convertible securities generally entail less risk than investments in common stock of the same issuer. Convertible securities provide for a stable stream of income with generally higher yields than common stocks, but there can be no assurance of current income because the issuers of the convertible securities may default on their obligations. A convertible security, in addition to providing fixed income, offers the potential for capital appreciation through the conversion feature, which enables the holder to benefit from increases in the market price of the underlying common stock. There can be no assurance of capital appreciation, however, because securities prices fluctuate. Convertible securities, however, generally offer lower interest or dividend 2 yields than non-convertible securities of similar quality because of the potential for capital appreciation. WARRANTS. (All Portfolios, except the Mortgage Portfolio) A warrant is an instrument issued by a corporation which gives the holder the right to subscribe to a specified amount of the corporation's capital stock at a set price for a specified period of time. A Portfolio may invest up to 5% of its total assets in warrants, except that this limitation does not apply to warrants purchased by the Portfolio that are sold in units with, or attached to, other securities. PARTICIPATION INTERESTS. (All Portfolios) Each Portfolio may purchase from financial institutions participation interests in securities in which the Portfolio may invest. A participation interest gives the Portfolio an undivided interest in the security in the proportion that the Portfolio's participation interest bears to the total principal amount of the security. These instruments may have fixed, floating or variable rates of interest with remaining maturities of 13 months or less. If the participation interest is unrated, or has been given a rating below that which is permissible for purchase by the Portfolio, the participation interest will be collateralized by U.S. Government securities, or, in the case of unrated participation interests, the Investment Manager must have determined that the instrument is of comparable quality to those instruments in which the Portfolio may invest. Each Portfolio may invest in corporate obligations denominated in U.S. or (except the Equity, Small Cap and Mortgage Portfolio) foreign currencies that are originated, negotiated and structured by a syndicate of lenders ("Co-Lenders") consisting of commercial banks, thrift institutions, insurance companies, financial companies or other financial institutions one or more of which administers the security on behalf of the syndicate (the "Agent Bank"). Co-Lenders may sell such securities to third parties called "Participants." Each Portfolio may invest in such securities either by participating as a Co-Lender at origination or by acquiring an interest in the security from a Co-Lender or a Participant (collectively, "participation interests"). Co-Lenders and Participants interposed between the Portfolio and the corporate borrower (the "Borrower"), together with Agent Banks, are referred to herein as "Intermediate Participants." Each Portfolio also may purchase a participation interest in a portion of the rights of an Intermediate Participant, which would not establish any direct relationship between the Fund, on behalf of the Portfolio, and the Borrower. In such cases, the Portfolio would be required to rely on the Intermediate Participant that sold the participation interest not only for the enforcement of the Portfolio's rights against the Borrower, but also for the receipt and processing of payments due to the Portfolio under the security. Because it may be necessary to assert through an Intermediate Participant such rights as may exist against the Borrower, if the Borrower fails to pay principal and interest when due, the Portfolio may be subject to delays, expenses and risks that are greater than those that would be involved if the Portfolio were to enforce its rights directly against the Borrower. Moreover, under the terms of a participation interest, the Portfolio may be regarded as a creditor of the Intermediate Participant (rather than of the Borrower), so that the Portfolio also may be subject to the risk that the Intermediate Participant may become insolvent. Similar risks may arise with respect to the Agent Bank if, for example, assets held by the Agent Bank for the benefit of the Portfolio were determined by the appropriate regulatory authority or court to be subject to the claims of the Agent Bank's creditors. In such case, the Portfolio might incur 3 certain costs and delays in realizing payment in connection with the participation interest or suffer a loss of principal and/or interest. Further, in the event of the bankruptcy or insolvency of the Borrower, the obligation of the Borrower to repay the loan may be subject to certain defenses that can be asserted by such Borrower as a result of improper conduct by the Agent Bank or Intermediate Participant. VARIABLE AND FLOATING RATE SECURITIES. (All Portfolios) Variable and floating rate securities provide for a periodic adjustment in the interest rate paid on the obligations. The terms of such obligations must provide that interest rates are adjusted periodically based upon an interest rate adjustment index as provided in the respective obligations. The adjustment intervals may be regular, and range from daily up to annually, or may be event based, such as based on a change in the prime rate. Each Portfolio may invest in floating rate debt instruments ("floaters"). The interest rate on a floater is a variable rate, which is tied to another interest rate, such as a money-market index or Treasury bill rate. The interest rate on a floater resets periodically, typically every six months. Because of the interest rate reset feature, floaters provide the Portfolio with a certain degree of protection against rises in interest rates, although the Portfolio will participate in any declines in interest rates as well. Each Portfolio (other than the Mortgage Portfolio) also may invest in inverse floating rate debt instruments ("inverse floaters"). The interest rate on an inverse floater resets in the opposite direction from the market rate of interest to which the inverse floater is indexed. An inverse floating rate security may exhibit greater price volatility than a fixed rate obligation of similar credit quality. MUNICIPAL OBLIGATIONS. (Bond, High Yield and Strategic Yield Portfolios only) In circumstances where the Investment Manager determines that investment in municipal obligations would facilitate the Portfolio's ability to accomplish its investment objective, each of these Portfolios may invest its assets in such obligations, including municipal obligations issued at a discount. Dividends on shares attributable to interest on municipal obligations held by the Portfolio will not be exempt from federal income taxes. Municipal obligations are susceptible to risks arising from the financial condition of the states, public bodies or municipalities issuing the securities. To the extent that state or local governmental entities are unable to meet their financial obligations, the income derived by the Portfolio from municipal obligations could be impaired. Municipal obligations are debt obligations issued by states, territories and possessions of the United States and the District of Columbia and their political subdivisions, agencies and instrumentalities, or multi-state agencies or authorities. Municipal obligations bear fixed, floating or variable rates of interest. Certain municipal obligations are subject to redemption at a date earlier than their stated maturity pursuant to call options, which may be separated from the related municipal obligations and purchased and sold separately. Each of these Portfolios also may acquire call options on specific municipal obligations. The Portfolio generally would purchase these call options to protect the Portfolio from the issuer of the related municipal obligation redeeming, or other holder of the call option from calling away, the municipal obligation before maturity. 4 Municipal obligations generally include debt obligations issued to obtain funds for various public purposes as well as certain industrial development bonds issued by or on behalf of public authorities. Municipal obligations are classified as general obligation bonds, revenue bonds and notes. General obligation bonds are secured by the issuer's pledge of its faith, credit and taxing power for the payment of principal and interest. Revenue bonds are payable from the revenue derived from a particular facility or class of facilities or, in some cases, from the proceeds of a special excise or other specific revenue source, but not from the general taxing power. Industrial development bonds, in most cases, are revenue bonds and generally do not carry the pledge of the credit of the issuing municipality, but generally are guaranteed by the corporate entity on whose behalf they are issued. Notes are short-term instruments, which are obligations of the issuing municipalities or agencies and are sold in anticipation of a bond sale, collection of taxes or receipt of other revenues. Municipal obligations include municipal lease/purchase agreements, which are similar to installment purchase contracts, for property or equipment issued by municipalities. While, in general, municipal obligations are tax exempt securities having relatively low yields as compared to taxable, non-municipal obligations of similar quality, certain municipal obligations are taxable obligations, offering yields comparable to, and in some cases greater than, the yields available on other permissible Portfolio investments. Dividends received by shareholders on Portfolio shares, which are attributable to interest income received by the Portfolio from municipal obligations generally, will be subject to federal income tax. Each of these Portfolios will invest in municipal obligations, the ratings of which correspond with the ratings of other permissible Portfolio investments. Each of these Portfolios currently intends to invest no more than 25% of its assets in municipal obligations. However, this percentage may be varied from time to time without shareholder approval. ZERO COUPON AND STRIPPED U.S. TREASURY SECURITIES. (Bond, High Yield, International Fixed-Income, Strategic Yield and Mortgage Portfolios) Each of these Portfolios may invest in zero coupon U.S. Treasury securities, which are Treasury notes and Bonds that have been stripped of their unmatured interest coupons, the coupons themselves and receipts or certificates representing interests in such stripped debt obligations and coupons. Zero coupon securities also are issued by corporations and financial institutions, which constitute a proportionate ownership of the issuer's pool of underlying U.S. Treasury securities. A zero coupon security pays no interest to its holder during its life and is sold at a discount to its face value at maturity. The market prices of zero coupon securities generally are more volatile than the market prices of securities that pay interest periodically and are likely to respond to a greater degree to changes in interest rates than non-zero coupon securities having similar maturities and credit qualities. Federal income tax law requires the holder of a zero coupon security or of certain pay-in-kind bonds to accrue income with respect to these securities prior to the receipt of cash payments. A Portfolio investing in such securities may be required to distribute such income accrued with respect to these securities and may have to dispose of portfolio securities under disadvantageous circumstances in order to generate cash to satisfy these distribution requirements. 5 MORTGAGE-RELATED SECURITIES. (Bond, High Yield, International Fixed-Income, Strategic Yield and Mortgage Portfolios and, to a limited extent, the Equity, Mid Cap, Small Cap and Global Equity Portfolios) Mortgage-related securities are secured, directly or indirectly, by pools of mortgages, and may include complex instruments such as collateralized mortgage obligations and stripped mortgage-backed securities. These securities also may include mortgage pass-through securities, interests in REMICs or other kinds of mortgage-backed securities. The mortgage-related securities which may be purchased include those with fixed, floating and variable interest rates and, except in the case of the Mortgage Portfolio, those with interest rates that change based on multiples of changes in interest rates and those with interest rates that change inversely to changes in interest rates. RESIDENTIAL MORTGAGE-RELATED SECURITIES. Each of these Portfolios may invest in mortgage-related securities representing participation interests in pools of one- to four-family residential mortgage loans issued by governmental agencies or instrumentalities, such as the GNMA, Fannie Mae and FHLMC, or by private entities. Residential mortgage-related securities issued by private entities are structured to provide protection to the senior class investors against potential losses on the underlying mortgage loans. This protection is generally provided by having the holders of the subordinated class of securities ("Subordinated Securities") take the first loss if there are defaults on the underlying commercial mortgage loans. Other protection, which may benefit all of the classes or particular classes, may include issuer guarantees, reserve funds, additional Subordinated Securities, cross-collateralization and over-collateralization. The Mortgage Portfolio does not invest in Subordinated Securities. COMMERCIAL MORTGAGE-RELATED SECURITIES. Each of these Portfolios may invest in commercial mortgage-related securities, which generally are multi-class debt or pass-through certificates secured by mortgage loans on commercial properties. Similar to residential mortgage-related securities, commercial mortgage-related securities have been issued using a variety of structures, including multi-class structures featuring senior and subordinated classes. GOVERNMENT-AGENCY SECURITIES. Mortgage-related securities issued by the Government National Mortgage Association ("GNMA") include GNMA Mortgage Pass-Through Certificates (also known as "Ginnie Maes") which are guaranteed as to the timely payment of principal and interest by GNMA and such guarantee is backed by the full faith and credit of the United States Government. GNMA is a wholly-owned U.S. Government corporation within the Department of Housing and Urban Development. GOVERNMENT-RELATED SECURITIES. Mortgage-related securities issued by Fannie Mae include Guaranteed Mortgage Pass-Through Certificates (also known as "Fannie Maes") which are solely the obligations of Fannie Mae and are not backed by or entitled to the full faith and credit of the United States Government. Fannie Mae is a government-sponsored organization owned entirely by private stockholders. Mortgage-related securities issued by the Federal Home Loan Mortgage Corporation ("FHLMC") include FHLMC Mortgage Participation Certificates (also known as "Freddie Macs" or "PCs"). FHLMC is a corporate instrumentality of the United States Government created pursuant to an Act of Congress which is owned entirely by Federal Home Loan Banks. 6 SUBORDINATED SECURITIES. Each of these Portfolios, other than the Mortgage Portfolio, may invest in Subordinated Securities issued or sponsored by commercial banks, savings and loan institutions, mortgage bankers, private mortgage insurance companies and other non-governmental issuers. Subordinated Securities have no governmental guarantee, and are subordinated in some manner as to the payment of principal and/or interest to the holders of more senior mortgage-related securities arising out of the same pool of mortgages. The holders of Subordinated Securities typically are compensated with a higher stated yield than are the holders of more senior mortgage-related securities. On the other hand, Subordinated Securities typically subject the holder to greater risk than senior mortgage-related securities and tend to be rated in a lower rating category, and frequently a substantially lower rating category, than the senior mortgage-related securities issued in respect of the same pool of mortgage. Subordinated Securities generally are likely to be more sensitive to changes in prepayment and interest rates and the market for such securities may be less liquid than is the case for traditional fixed-income securities and senior mortgage-related securities. COLLATERALIZED MORTGAGE OBLIGATIONS AND MULTI-CLASS PASS-THROUGH SECURITIES. Collateralized mortgage obligations or "CMOs" are multiclass bonds backed by pools of mortgage pass-through certificates or mortgage loans. CMOs may be collateralized by (a) pass-through certificates issued or guaranteed by GNMA, Fannie Mae or FHLMC, (b) unsecuritized mortgage loans insured by the Federal Housing Administration or guaranteed by the Department of Veterans' Affairs, (c) unsecuritized conventional mortgages, (d) other mortgage-related securities or (e) any combination thereof. CMOs may be issued by agencies or instrumentalities of the U.S. Government, or by private originators of, or investors in, mortgage loans, including depository institutions, mortgage banks, investment banks and special purpose subsidiaries of the foregoing. The issuer of CMOs or multi-class pass-through securities may elect to be treated as a REMIC. The Bond Portfolio, High Yield Portfolio and International Fixed-Income Portfolio may invest, to a limited extent, in residual interests in REMICs. See "Taxation." Each class of CMOs, often referred to as a "tranche," is issued at a specific coupon rate and has a stated maturity or final distribution date; these characteristics will vary from one tranche to another. Principal prepayments on collateral underlying a CMO may cause it to be retired substantially earlier than the stated maturities or final distribution dates. The principal and interest on the underlying mortgages may be allocated among the several classes of a series of a CMO in many ways. One or more tranches of a CMO may have coupon rates, which reset periodically at a specified increment over an index, such as the London Interbank Offered Rate ("LIBOR") (or sometimes more than one index). These floating rate CMOs typically are issued with lifetime caps on the coupon rate thereon. Each of these Portfolios, other than the Mortgage Portfolio, also may invest in inverse floating rate CMOs. Inverse floating rate CMOs constitute a tranche of a CMO with a coupon rate that moves in the reverse direction to an applicable index such as the LIBOR. Accordingly, the coupon rate thereon will increase as interest rates decrease. Inverse floating rate CMOs are typically more volatile than fixed or floating rate tranches of CMOs. Many inverse floating rate CMOs have coupons that move inversely to a multiple of the applicable indexes. The coupon varying inversely to a multiple of an applicable index creates a leverage factor. The markets for inverse floating rate CMOs with highly leveraged characteristics may at times be very thin. The Portfolio's ability to dispose of its positions in 7 such securities will depend on the degree of liquidity in the markets for such securities. It is impossible to predict the amount of trading interest that may exist in such securities, and therefore the future degree of liquidity. It should be noted that inverse floaters based on multiples of a stated index are designed to be highly sensitive to changes in interest rates and can subject the holders thereof to extreme reductions of yield and loss of principal. STRIPPED MORTGAGE-BACKED SECURITIES. Each of these Portfolios, other than the Mortgage Portfolio, also may invest in stripped mortgage-backed securities. Stripped mortgage-backed securities are created by segregating the cash flows from underlying mortgage loans or mortgage securities to create two or more new securities, each with a specified percentage of the underlying security's principal or interest payments. Mortgage securities may be partially stripped so that each investor class received some interest and some principal. When securities are completely stripped, however, all of the interest is distributed to holders of one type of security, known as an interest-only security, or IO, and all of the principal is distributed to holders of another type of security known as a principal-only security, or PO. Strips can be created in a pass-through structure or as tranches of a CMO. The yields to maturity on IOs and POs are very sensitive to the rate of principal payments (including prepayments) on the related underlying mortgage assets. If the underlying mortgage assets experience greater than anticipated prepayments of principal, the Portfolio may not fully recoup its initial investment in IOs. Conversely, if the underlying mortgage assets experience less than anticipated prepayments of principal, the yield on POs could be materially and adversely affected. PRIVATE ENTITY SECURITIES. These mortgage-related securities are issued by commercial banks, savings and loan institutions, mortgage bankers, private mortgage insurance companies and other non-governmental issuers. Timely payment of principal and interest on mortgage-related securities backed by pools created by non-governmental issuers often is supported partially by various forms of insurance or guarantees, including individual loan, title, pool and hazard insurance. The insurance and guarantees are issued by government entities, private insurers and the mortgage poolers. There can be no assurance that the private insurers or mortgage poolers can meet their obligations under the policies, so that if the issuers default on their obligations the holders of the security could sustain a loss. No insurance or guarantee covers the Portfolio or the price of the Portfolio's shares. Mortgage-related securities issued by non-governmental issuers generally offer a higher rate of interest than government-agency and government-related securities because there are no direct or indirect government guarantees of payment. CMO RESIDUALS. CMO Residuals are derivative mortgage securities issued by agencies or instrumentalities of the U.S. Government or by private originators of, or investors in, mortgage loans, including savings and loan associations, mortgage banks, commercial banks, investment banks and special purpose subsidiaries of the foregoing. The cash flow generated by the mortgage assets underlying series of CMOs is applied first to make required payments of principal of and interest on the CMOs and second to pay the related administrative expenses of the issuer. The residual in a CMO structure generally represents the interest in any excess cash flow remaining after making the foregoing payments. Each payment of such excess cash flow to a holder of the related CMO Residual represents dividend or interest income and/or a return of capital. The amount of residual cash flow resulting from a CMO will depend on, among other things, the characteristics of the mortgage 8 assets, the coupon rate of each class of CMOs, prevailing interest rates, the amount of administrative expenses and the prepayment experience on the mortgage assets. In particular, the yield to maturity on CMO Residuals is extremely sensitive to prepayments on the related underlying mortgage assets in the same manner as an IO class of stripped mortgage-back securities. See "Stripped Mortgage-Backed Securities," above. In addition, if a series of a CMO includes a class that bears interest at an adjustable rate, the yield to maturity on the related CMO residual will also be extremely sensitive to the level of the index upon which interest rate adjustments are based. As described above with respect to stripped mortgage-back securities, in certain circumstances, the Portfolio may fail to fully recoup its initial investment in a CMO Residual. CMO Residuals generally are purchased and sold by institutional investors through several investment banking firms acting as brokers or dealers. CMO Residuals may not have the liquidity of other more established securities trading in other markets. Transactions in CMO Residuals generally are completed only after careful review of the characteristics of the securities in question. In addition, CMO Residuals, whether or not registered under the Securities Act, may be subject to certain restrictions of transferability. Ownership of certain CMO Residuals imposes liability for certain of the expenses of the related CMO issuer on the purchaser. The Investment Manager will not purchase any CMO Residual that would impose such liability on the Portfolio. OTHER MORTGAGE-RELATED SECURITIES. Other mortgage-related securities include securities other than those described above that directly or indirectly represent a participation in, or are secured by and payable from, mortgage loans on real property. Other mortgage-related securities may be equity or debt securities issued by agencies or instrumentalities of the U.S. Government or by private originators of, or investors in, mortgage loans, including savings and loan associations, homebuilders, mortgage banks, commercial banks, investment banks, partnerships, trusts and special purpose entities of the foregoing. REAL ESTATE INVESTMENT TRUSTS. (All Portfolios, except the Mortgage Portfolio) A Real Estate Investment Trust ("REIT") is a corporation, or a business trust that would otherwise be taxed as a corporation, which meets the definitional requirements of the Internal Revenue Code of 1986, as amended (the "Code"). The Code permits a qualifying REIT to deduct dividends paid, thereby effectively eliminating corporate level federal income tax and making the REIT a pass-through vehicle for federal income tax purposes. To meet the definitional requirements of the Code, a REIT must, among other things, invest substantially all of its assets in interests in real estate (including mortgages and other REITs) or cash and government securities, derive most of its income from rents from real property or interest on loans secured by mortgages on real property, and distribute to shareholders annually a substantial portion of its otherwise taxable income. REITs are characterized as equity REITs, mortgage REITs and hybrid REITs. Equity REITs, which may include operating or finance companies, own real estate directly and the value of, and income earned by, the REITs depends upon the income of the underlying properties and the rental income they earn. Equity REITs also can realize capital gains (or losses) by selling properties that have appreciated (or depreciated) in value. Mortgage REITs 9 can make construction, development or long-term mortgage loans and are sensitive to the credit quality of the borrower. Mortgage REITs derive their income from interest payments on such loans. Hybrid REITs combine the characteristics of both equity and mortgage REITs, generally by holding both ownership interests and mortgage interests in real estate. The values of securities issued by REITs are affected by tax and regulatory requirements and by perceptions of management skill. They also are subject to heavy cash flow dependency, defaults by borrowers or tenants, self-liquidation and the possibility of failing to qualify for tax-free status under the Code or to maintain exemption from the Investment Company Act of 1940, as amended (the "1940 Act"). ASSET-BACKED SECURITIES. (Bond, High Yield, International Fixed-Income, Strategic Yield and Mortgage Portfolios) Each of these Portfolios may invest in asset-backed securities, including interests in pools of receivables, such as motor vehicle installment purchase obligations, credit card receivables, home equity loans, home improvement loans and manufactured housing loans. These securities may be in the form of pass-through instruments or asset-backed bonds. The securities, all of which are issued by non-governmental entities and carry no direct or indirect government guarantee, are structurally similar to the collateralized mortgage obligations and mortgage pass-through securities described above. As with mortgage-backed securities, asset-backed securities are often backed by a pool of assets representing the obligations of a number of different parties and use similar credit enhancement techniques. Asset-backed securities present certain risks that are not presented by mortgage-related securities. Primarily, these securities may provide the Portfolio with a less effective security interest in the related collateral than do mortgage-related securities. Therefore, there is the possibility that recoveries on the underlying collateral may not, in some cases, be available to support payments on these securities. Credit card receivables are generally unsecured and the debtors are entitled to the protection of a number of state and federal consumer credit laws, many of which give such debtors the right to set off certain amounts owed on the credit cards, thereby reducing the balance due. Most organizations that issue asset-backed securities relating to motor vehicle installment purchase obligations perfect their interests in their respective obligations only by filing a financing statement and by having the servicer of the obligations, which is usually the originator, take custody thereof. In such circumstances, if the servicer were to sell the same obligations to another party, in violation of its duty not to so do, there is a risk that such party could acquire an interest in the obligations superior to that of the holders of the securities. Also, although most such obligations grant a security interest in the motor vehicle being financed, in most states the security interest in a motor vehicle must be noted on the certificate of title to perfect such security interest against competing claims of other parties. Due to the large number of vehicles involved, however, the certificate of title to each vehicle financed, pursuant to the obligations underlying the securities, usually is not amended to reflect the assignment of the seller's security interest for the benefit of the holders of the securities. Therefore, there is the possibility that recoveries on repossessed collateral may not, in some cases, be available to support payments on those securities. In addition, various state and federal laws give the motor vehicle owner the right to assert against the holder of the owner's obligation certain defenses such owner would have against the seller of the motor vehicle. The assertion of such defenses could reduce payments on the related securities. 10 INVESTMENT COMPANIES. (All Portfolios) Each of the Mid Cap, Global Equity, International Small Cap, Emerging Markets, International Equity Select, High Yield and Mortgage Portfolios may invest, to the extent permitted under the 1940 Act, in securities issued by investment companies, which principally invest in securities of the type in which the Portfolio invests. Under the 1940 Act, a Portfolio's investment in such securities, subject to certain exceptions, currently is limited to (i) 3% of the total voting stock of any one investment company, (ii) 5% of the Portfolio's total assets with respect to any one investment company and (iii) 10% of the Portfolio's total assets in the aggregate. The Equity, Small Cap, International Equity, Bond, International Fixed-Income and Strategic Yield Portfolios may not purchase securities of other investment companies except in connection with a merger, consolidation, acquisition or reorganization, and the Equity, Small Cap and International Equity Portfolios may purchase securities of any one closed-end fund in an amount up to 5% of the Portfolio's total assets and may purchase securities of closed-end funds in the aggregate in an amount of up to 10% of the Portfolio's total assets. Investments in the securities of investment companies may involve duplication of advisory fees and certain other expenses. ILLIQUID SECURITIES. (All Portfolios) Each Portfolio may invest up to 10% (15% in the case of the Mid Cap, Global Equity, International Equity Select, High Yield and Mortgage Portfolios) of the value of its net assets (total assets, in the case of the Equity Portfolio) in securities as to which a liquid trading market does not exist, provided such investments are consistent with the Portfolio's investment objective. Such securities may include securities that are not readily marketable, such as securities that are subject to legal or contractual restrictions on resale, repurchase agreements providing for settlement in more than seven days after notice, certain mortgage-related securities, and certain privately negotiated, non-exchange traded options and securities used to cover such options. A Portfolio's investment in illiquid securities is subject to the risk that should the Portfolio desire to sell any of these securities when a ready buyer is not available at a price that is deemed to be representative of their value, the value of the Portfolio's net assets could be adversely affected. Securities that have legal or contractual restrictions on resale but have a readily available market are not considered illiquid for purposes of this limitation. NON-PUBLICLY TRADED SECURITIES. Securities which have not been registered under the Securities Act of 1933, as amended (the "Securities Act"), are referred to as private placements or restricted securities and are purchased directly from the issuer or in the secondary market. Non-publicly traded securities (including Rule 144A Securities) may involve a high degree of business and financial risk and may result in substantial losses. These securities may be less liquid than publicly traded securities, and a Portfolio may take longer to liquidate these positions than would be the case for publicly traded securities. Companies whose securities are not publicly traded may not be subject to the disclosure and other investor protection requirements applicable to companies whose securities are publicly traded. Limitations on resale may have an adverse effect on the marketability of portfolio securities. A Portfolio might also have to register such restricted securities in order to dispose of them, resulting in additional expense and delay. RULE 144A SECURITIES. Rule 144A under the Securities Act establishes a "safe harbor" from the registration requirements of the Securities Act for resales of certain securities to qualified institutional buyers ("Rule 144A Securities"). Investing in Rule 144A Securities could have the 11 effect of increasing the level of illiquidity in a Portfolio to the extent that qualified institutional buyers are unavailable or uninterested in purchasing such securities. MONEY MARKET INSTRUMENTS; TEMPORARY DEFENSIVE POSITIONS. (All Portfolios) When the Investment Manager determines that adverse market conditions exist, a Portfolio may adopt a temporary defensive position and invest some or all of its assets in money market instruments, including U.S. Government securities, repurchase agreements, bank obligations and commercial paper. For the Emerging Markets Portfolio, when the Investment Manager believes it is warranted for defensive purposes, the Portfolio may invest without limitation in high quality fixed-income securities or equity securities of U.S. companies. Each Portfolio also may purchase money market instruments when it has cash reserves or in anticipation of taking a market position. INVESTMENT TECHNIQUES The following information supplements and should be read in conjunction with the Fund's Prospectus. BORROWING MONEY. (All Portfolios) Each Portfolio may borrow money from banks for temporary or emergency (not leveraging) purposes to the extent permitted under the 1940 Act, which permits an investment company to borrow in an amount up to 33 1/3% of the value of its total assets (including the amount borrowed) valued at the lesser of cost or market, less liabilities (including the amount borrowed) at the time the borrowing is made. In addition, the Equity, Mid Cap, Global Equity, International Small Cap, Emerging Markets, International Equity Select and High Yield Portfolios may each borrow for investment purposes to the extent permitted under the 1940 Act. While such borrowings exceed 5% of a Portfolio's total assets, the Portfolio will not make any additional investments. See "Leverage" below. LEVERAGE. (Equity, Mid Cap, Global Equity, International Small Cap, Emerging Markets, International Equity Select and High Yield Portfolios) Leveraging (that is, buying securities using borrowed money) exaggerates the effect on net asset value of any increase or decrease in the market value of the Portfolio's investment. Money borrowed for leveraging is limited to 33 1/3% of the value of the Portfolio's total assets. These borrowings would be subject to interest costs, which may or may not be recovered by appreciation of the securities purchased; in certain cases, interest costs may exceed the return received on the securities purchased. For borrowings for investment purposes, the 1940 Act requires the Portfolio to maintain continuous asset coverage (that is, total assets including borrowings, less liabilities exclusive of borrowings) of 300% of the amount borrowed. If the required coverage should decline as a result of market fluctuations or other reasons, the Portfolio may be required to sell some of its portfolio securities within three days to reduce the amount of its borrowings and restore the 300% asset coverage, even though it may be disadvantageous from an investment standpoint to sell securities at that time. The Portfolio also may be required to maintain minimum average balances in connection with such borrowing or pay a commitment or other fee to maintain a line of credit; either of these requirements would increase the cost of borrowing over the stated interest rate. 12 Each Portfolio may enter into reverse repurchase agreements with banks, brokers or dealers. This form of borrowing involves the transfer by the Portfolio of an underlying debt instrument in return for cash proceeds based on a percentage of the value of the security. The Portfolio retains the right to receive interest and principal payments on the security. At an agreed upon future date, the Portfolio repurchases the security at principal plus accrued interest. To the extent a Portfolio enters into a reverse repurchase agreement, the Portfolio will maintain in a segregated custodial account permissible liquid assets at least equal to the aggregate amount of its reverse repurchase obligations, plus accrued interest, in certain cases, in accordance with releases promulgated by the Securities and Exchange Commission (the "Commission"). Except for these transactions, each of these Portfolio's borrowings generally will be unsecured. LENDING PORTFOLIO SECURITIES. (All Portfolios) Each Portfolio may lend securities from its portfolio to brokers, dealers and other financial institutions needing to borrow securities to complete certain transactions. The Portfolio continues to be entitled to payments in amounts equal to the interest, dividends or other distributions payable on the loaned securities which affords the Portfolio an opportunity to earn interest on the amount of the loan and on the loaned securities' collateral. Loans of portfolio securities may not exceed 33-1/3% (10% with respect to the Equity Portfolio, Small Cap Portfolio, International Equity Portfolio, Bond Portfolio, International Fixed-Income Portfolio and Strategic Yield Portfolio) of the value of the Portfolio's total assets, and the Portfolio will receive collateral consisting of cash, U.S. Government securities or irrevocable letters of credit which will be maintained at all times in an amount equal to at least 100% of the current market value of the loaned securities. Such loans are terminable by the Portfolio at any time upon specified notice. The Portfolio might experience risk of loss if the institution with which it has engaged in a portfolio loan transaction breaches its agreement with the Portfolio. In connection with its securities lending transactions, a Portfolio may return to the borrower or a third party which is unaffiliated with the Portfolio, and which is acting as a "placing broker," a part of the interest earned from the investment of collateral received for securities loaned. DERIVATIVES. (All Portfolios) Each Portfolio may invest in, or enter into, derivatives to the extent described in the Prospectus and this Statement of Additional Information for a variety of reasons, including to hedge certain market risks, to provide a substitute for purchasing or selling particular securities or to increase potential income gain. Derivatives may provide a cheaper, quicker or more specifically focused way for the Portfolio to invest than "traditional" securities would. However, there is the risk that these transactions sometimes may reduce returns or increase volatility. Derivatives can be volatile and involve various types and degrees of risk, depending upon the characteristics of the particular derivative and the portfolio as a whole. Derivatives permit a Portfolio to increase or decrease the level of risk, or change the character of the risk, to which its portfolio is exposed in much the same way as the Portfolio can increase or decrease the level of risk, or change the character of the risk, of its portfolio by making investments in specific securities. Derivatives can be highly sensitive to changes in their underlying security, interest rate or index and may entail investment exposures that are greater than their cost would 13 suggest, meaning that a small investment in derivatives could have a large potential impact on a Portfolio's performance. If a Portfolio invests in derivatives at inopportune times or judges market conditions incorrectly, such investments may lower the Portfolio's return or result in a loss. A Portfolio also could experience losses if its derivatives were poorly correlated with its other investments, or if the Portfolio were unable to liquidate its position because of an illiquid secondary market. The market for many derivatives is, or suddenly can become, illiquid. Changes in liquidity may result in significant, rapid and unpredictable changes in the prices for derivatives. Although neither the Fund nor any Portfolio will be a commodity pool, certain derivatives subject the Portfolios to the rules of the Commodity Futures Trading Commission (the "CFTC") which limit the extent to which a Portfolio can invest in such derivatives. A Portfolio may invest in futures contracts and options with respect thereto for hedging purposes without limit. However, no Portfolio may invest in such contracts and options for other purposes if the sum of the amount of initial margin deposits and premiums paid for unexpired options with respect to such contracts, other than for bona fide hedging purposes, exceeds 5% of the liquidation value of the Portfolio's assets, after taking into account unrealized profits and unrealized losses on such contracts and options; provided, however, that in the case of an option that is in-the-money at the time of purchase, the in-the-money amount may be excluded in calculating the 5% limitation. When required by the Commission, a Portfolio will segregate permissible liquid assets to cover its obligations relating to its transactions in derivatives. To maintain this required cover, the Portfolio may have to sell portfolio securities at disadvantageous prices or times since it may not be possible to liquidate a derivative position at a reasonable price. Derivatives may be purchased on established exchanges or through privately negotiated transactions referred to as over-the-counter derivatives. Exchange-traded derivatives generally are guaranteed by the clearing agency, which is the issuer or counterparty to such derivatives. This guarantee usually is supported by a daily variation margin system operated by the clearing agency in order to reduce overall credit risk. As a result, unless the clearing agency defaults, there is relatively little counterparty credit risk associated with derivatives purchased on an exchange. By contrast, no clearing agency guarantees over-the-counter derivatives. Therefore, each party to an over-the-counter derivative bears the risk that the counterparty will default. Accordingly, the Investment Manager will consider the creditworthiness of counterparties to over-the-counter derivatives in the same manner as it would review the credit quality of a security to be purchased by the Portfolio. Over-the-counter derivatives are less liquid than exchange-traded derivatives since the other party to the transaction may be the only investor with sufficient understanding of the derivative to be interested in bidding for it. FUTURES TRANSACTIONS--IN GENERAL. (All Portfolios, except the Equity, Small Cap, International Equity and Strategic Yield Portfolios) Each Portfolio may enter into futures contracts in U.S. domestic markets, or, except the Mortgage Portfolio, on exchanges located outside the United States. Foreign markets may offer advantages such as trading opportunities or arbitrage possibilities not available in the United States. Foreign markets, however, may have greater risk 14 potential than domestic markets. For example, some foreign exchanges are principal markets so that no common clearing facility exists and an investor may look only to the broker for performance of the contract. In addition, any profits a Portfolio might realize in trading could be eliminated by adverse changes in the currency exchange rate, or the Portfolio could incur losses as a result of those changes. Transactions on foreign exchanges may include both commodities, which are traded on domestic exchanges and those which are not. Unlike trading on domestic commodity exchanges, trading on foreign commodity exchanges is not regulated by the CFTC. Engaging in these transactions involves risk of loss to the Portfolio, which could adversely affect the value of the Portfolio's net assets. Although each of these Portfolios intends to purchase or sell futures contracts only if there is an active market for such contracts, no assurance can be given that a liquid market will exist for any particular contract at any particular time. Many futures exchanges and boards of trade limit the amount of fluctuation permitted in futures contract prices during a single trading day. Once the daily limit has been reached in a particular contract, no trades may be made that day at a price beyond that limit or trading may be suspended for specified periods during the trading day. Futures contract prices could move to the limit for several consecutive trading days with little or no trading, thereby preventing prompt liquidation of futures positions and potentially subjecting the Portfolio to substantial losses. Successful use of futures by a Portfolio also is subject to the Investment Manager's ability to predict correctly movements in the direction of the relevant market, and, to the extent the transaction is entered into for hedging purposes, to ascertain the appropriate correlation between the transaction being hedged and the price movements of the futures contract. For example, if a Portfolio uses futures to hedge against the possibility of a decline in the market value of securities held in its portfolio and the prices of such securities instead increase, the Portfolio will lose part or all of the benefit of the increased value of securities which it has hedged because it will have offsetting losses in its futures positions. Furthermore, if in such circumstances the Portfolio has insufficient cash, it may have to sell securities to meet daily variation margin requirements. The Portfolio may have to sell such securities at a time when it may be disadvantageous to do so. Pursuant to regulations and/or published positions of the Commission, a Portfolio may be required to segregate permissible liquid assets in connection with its commodities transactions in an amount generally equal to the value of the underlying commodity. The segregation of such assets will have the effect of limiting the Portfolio's ability otherwise to invest those assets. SPECIFIC FUTURES TRANSACTIONS. The Mid Cap, Global Equity, International Small Cap, Emerging Markets and International Equity Select Portfolios may purchase and sell stock index futures contracts. A stock index future obligates the Portfolio to pay or receive an amount of cash equal to a fixed dollar amount specified in the futures contract multiplied by the difference between the settlement price of the contract on the contract's last trading day and the value of the index based on the stock prices of the securities that comprise it at the opening of trading in such securities on the next business day. The Global Equity, International Small Cap, Emerging Markets, International Equity Select, Bond, High Yield, International Fixed-Income and Mortgage Portfolios may 15 purchase and sell interest rate futures contracts. An interest rate future obligates the Portfolio to purchase or sell an amount of a specific debt security at a future date at a specific price. Each Portfolio, except the Equity, Small Cap, International Equity, Bond, Strategic Yield and Mortgage Portfolios, may purchase and sell currency futures. A currency future obligates the Portfolio to purchase or sell an amount of a specific currency at a future date at a specific price. OPTIONS--IN GENERAL. (All Portfolios, except the Small Cap and International Equity Portfolios) Each Portfolio may buy and sell (write) call and put options. A call option gives the purchaser of the option the right to buy, and obligates the writer to sell, the underlying security or securities at the exercise price at any time during the option period, or at a specific date. Conversely, a put option gives the purchaser of the option the right to sell, and obligates the writer to buy, the underlying security or securities at the exercise price at any time during the option period, or at a specified date. A covered call option written by a Portfolio is a call option with respect to which the Portfolio owns the underlying security or otherwise covers the transaction by segregating permissible liquid assets. A put option written by a Portfolio is covered when, among other things, the Portfolio segregates permissible liquid assets having a value equal to or greater than the exercise price of the option to fulfill the obligation undertaken. The principal reason for writing covered call and put options is to realize, through the receipt of premiums, a greater return than would be realized on the underlying securities alone. A Portfolio receives a premium from writing covered call or put options, which it retains whether or not the option is exercised. There is no assurance that sufficient trading interest to create a liquid secondary market on a securities exchange will exist for any particular option or at any particular time, and for some options no such secondary market may exist. A liquid secondary market in an option may cease to exist for a variety of reasons. In the past, for example, higher than anticipated trading activity or order flow, or other unforeseen events, at times have rendered certain of the clearing facilities inadequate and resulted in the institution of special procedures, such as trading rotations, restrictions on certain types of orders or trading halts or suspensions in one or more options. There can be no assurance that similar events, or events that may otherwise interfere with the timely execution of customers' orders, will not recur. In such event, it might not be possible to effect closing transactions in particular options. If, as a covered call option writer, a Portfolio is unable to effect a closing purchase transaction in a secondary market, it will not be able to sell the underlying security until the option expires or it delivers the underlying security upon exercise or it otherwise covers its position. SPECIFIC OPTIONS TRANSACTIONS. Each of these Portfolios may buy and sell call and put options in respect of specific securities (or groups or "baskets" of specific securities) or indices listed on national securities exchanges or traded in the over-the-counter market. An option on an index is similar to an option in respect of specific securities, except that settlement does not occur by delivery of the securities comprising the index. Instead, the option holder receives an amount of cash if the closing level of the index upon which the option is based is greater than, in the case of a call, or less than, in the case of a put, the exercise price of the option. Thus, the effectiveness 16 of purchasing or writing index options will depend upon price movements in the level of the index rather than the price of a particular security. Each Portfolio, except the Equity, Small Cap, International Equity, Bond and Mortgage Portfolios, may buy and sell call and put options on foreign currency. These options convey the right to buy or sell the underlying currency at a price which is expected to be lower or higher than the spot price of the currency at the time the option is exercised or expires. Each Portfolio, except the Small Cap, International Equity and Mortgage Portfolios, may purchase cash-settled options on interest rate swaps, interest rate swaps denominated in foreign currency (except in the case of the Equity, Small Cap and Bond Portfolios) and (except in the case of the Bond, International Fixed-Income and Mortgage Portfolios) equity index swaps in pursuit of its investment objective. Interest rate swaps involve the exchange by a Portfolio with another party of their respective commitments to pay or receive interest (for example, an exchange of floating-rate payments for fixed-rate payments) denominated in U.S. dollars or foreign currency. Equity index swaps involve the exchange by the Portfolio with another party of cash flows based upon the performance of an index or a portion of an index of securities which usually includes dividends. A cash-settled option on a swap gives the purchaser the right, but not the obligation, in return for the premium paid, to receive an amount of cash equal to the value of the underlying swap as of the exercise date. These options typically are purchased in privately negotiated transactions from financial institutions, including securities brokerage firms. Successful use by a Portfolio of options will be subject to the Investment Manager's ability to predict correctly movements in the prices of individual stocks, the stock market generally, foreign currencies or interest rates as well as general market conditions. To the extent the Investment Manager's predictions are incorrect, the Portfolio may incur losses. FUTURE DEVELOPMENTS. The relevant Portfolios may take advantage of opportunities in options and futures contracts and options on futures contracts and any other derivatives which are not presently contemplated for use by the Portfolio or which are not currently available but which may be developed, to the extent such opportunities are both consistent with the Portfolio's investment objective and legally permissible for the Portfolio. Before entering into such transactions or making any such investment, the Portfolio will provide appropriate disclosure in the Prospectus or Statement of Additional Information. SHORT-SELLING. (Mid Cap, High Yield and Mortgage Portfolios) Each of these Portfolios may engage in short sales of securities. In these transactions, the Portfolio sells a security it does not own in anticipation of a decline in the market value of the security. To complete the transaction, the Portfolio must borrow the security to make delivery to the buyer. The Portfolio is obligated to replace the security borrowed by purchasing it subsequently at the market price at the time of replacement. The price at such time may be more or less than the price at which the security was sold by the Portfolio, which would result in a loss or gain, respectively. The Portfolio also may make short sales "against the box," in which the Portfolio enters into a short sale of a security it owns. Securities will not be sold short if, after effect is given to any such short sale, the total market value of all securities sold short would exceed 25% of the value of the Portfolio's net assets. 17 Until the Portfolio closes its short position or replaces the borrowed security, it will: (a) segregate permissible liquid assets in an amount that, together with the amount deposited as collateral, always equals the current value of the security sold short; or (b) otherwise cover its short position. FORWARD COMMITMENTS. (All Portfolios) A Portfolio may purchase or sell securities on a forward commitment, when-issued or delayed delivery basis, which means delivery and payment take place a number of days after the date of the commitment to purchase or sell the securities at a predetermined price and/or yield. Typically, no interest accrues to the purchaser until the security is delivered. When purchasing a security on a forward commitment basis, the Portfolio assumes the rights and risks of ownership of the security, including the risk or price and yields fluctuations, and takes such fluctuations into account when determining its net asset value. Because the Portfolio is not required to pay for these securities until the delivery date, these risks are in addition to the risks associated with the Portfolio's other investments. If the Portfolio is fully or almost fully invested when forward commitment purchases are outstanding, such purchases may result in a form of leverage. The Portfolio intends to engage in forward commitments to increase its portfolio's financial exposure to the types of securities in which it invests. Leveraging the portfolio in this manner will increase the Portfolio's exposure to changes in interest rates and will increase the volatility of its returns. The Portfolio will segregate permissible liquid assets at least equal at all times to the amount of the Portfolio's purchase commitments. At no time will the Portfolio have more than 33 1/3% of its assets committed to purchase securities on a forward commitment basis. Securities purchased on a forward commitment or when-issued basis are subject to changes in value (generally changing in the same way, i.e., appreciating when interest rates decline and depreciating when interest rates rise) based upon the public's perception of the creditworthiness of the issuer and changes, real or anticipated, in the level of interest rates. Securities purchased on a forward commitment or when-issued basis may expose a Portfolio to risks because they may experience such fluctuations prior to their actual delivery. Purchasing securities on a forward commitment or when-issued basis can involve the additional risk that the yield available in the market when the delivery takes place actually may be higher than that obtained in the transaction itself. Purchasing securities on a forward commitment or when-issued basis when the Portfolio is fully or almost fully invested may result in greater potential fluctuation in the value of the Portfolio's net assets and its net asset value per share. FORWARD ROLL TRANSACTIONS. (Mortgage Portfolio) To enhance current income, the Portfolio may enter into forward roll transactions with respect to mortgage-related securities. In a forward roll transaction, the Portfolio sells a mortgage-related security to a financial institution, such as a bank or broker-dealer, and simultaneously agrees to purchase a similar security from the institution at a later date at an agreed upon price. The securities that are purchased will bear the same interest rate as those sold, but generally will be collateralized by different pools of mortgages with different pre-payment histories than those sold. During the period between the sale and purchase, the Portfolio will not be entitled to receive interest and principal payments on the securities sold. Proceeds of the sale typically will be invested in short-term instruments, particularly repurchase agreements, commercial paper and agency discount notes, and the income from these investments, together with any additional fee income received on the sale will be expected to generate income for the Portfolio exceeding the yield on the 18 securities sold. Forward roll transactions involve the risk that the market value of the securities sold by the Portfolio may decline below the purchase price of those securities. The Portfolio will segregate permissible liquid assets at least equal to the amount of the repurchase price (including accrued interest). SWAP AGREEMENTS. (All Portfolios) To the extent consistent with the Portfolio's investment objective and management policies as set forth herein, each Portfolio may enter into interest rate, index, total return and, except the Mortgage Portfolio, equity and currency rate swap agreements. These transactions are entered into in an attempt to obtain a particular return when it is considered desirable to do so, possibly at a lower cost to the Portfolio than if the Portfolio had invested directly in the asset that yielded the desired return. Swap agreements are two-party contracts entered into primarily by institutional investors for periods ranging from a few weeks to more than a year. In a standard swap transaction, two parties agree to exchange the returns (or differentials in rates of return) earned or realized on particular predetermined investments or instruments, which may be adjusted for an interest factor. The gross returns to be exchanged or "swapped" between the parties are generally calculated with respect to a "notional amount," i.e., the return on or increase in value of a particular dollar amount invested at a particular interest rate, in a particular foreign currency, or in a "basket" of securities representing a particular index. Forms of swap agreements include interest rate caps, under which, in return for a premium, one party agrees to make payments to the other to the extent interest rates exceed a specified rate or "cap"; interest rate floors, under which, in return for a premium, one party agrees to make payments to the other to the extent interest rates fall below a specified level or "floor"; and interest rate collars, under which a party sells a cap and purchases a floor or vice versa in an attempt to protect itself against interest rate movements exceeding given minimum or maximum levels. Most swap agreements entered into by a Portfolio would calculate the obligations of the parties to the agreement on a "net basis." Consequently, the Portfolio's current obligations (or rights) under a swap agreement generally will be equal only to the net amount to be paid or received under the agreement based on the relative values of the positions held by each party to the agreement (the "net amount"). The risk of loss with respect to swaps is limited to the net amount of payments that the Portfolio is contractually obligated to make. If the other party to a swap defaults, the Portfolio's risk of loss consists of the net amount of payments that the Portfolio contractually is entitled to receive. FOREIGN CURRENCY TRANSACTIONS. (All Portfolios, except the Equity, Small Cap, Bond and Mortgage Portfolios) Foreign currency transactions may be entered into for a variety of purposes, including: to fix in U.S. dollars, between trade and settlement date, the value of a security the Portfolio has agreed to buy or sell; to hedge the U.S. dollar value of securities the Portfolio already owns, particularly if it expects a decrease in the value of the currency in which the foreign security is denominated; or to gain exposure to the foreign currency in an attempt to realize gains. Foreign currency transactions may involve, for example, the Portfolio's purchase of foreign currencies for U.S. dollars or the maintenance of short positions in foreign currencies. A short position would involve the Portfolio agreeing to exchange an amount of a currency it did not currently own for another currency at a future date in anticipation of a decline in the value of 19 the currency sold relative to the currency the Portfolio contracted to receive. The Portfolio's success in these transactions will depend principally on the Investment Manager's ability to predict accurately the future exchange rates between foreign currencies and the U.S. dollar. CERTAIN INVESTMENT CONSIDERATIONS AND RISKS EQUITY SECURITIES. (All Portfolios, except the Bond, International Fixed-Income and Mortgage Portfolios) Equity securities fluctuate in value, often based on factors unrelated to the value of the issuer of the securities, and such fluctuations can be pronounced. Changes in the value of a Portfolio's investments will result in changes in the value of its shares and thus the Portfolio's total return to investors. The securities of the smaller companies in which the Small Cap, International Small Cap and Emerging Markets Portfolios may invest may be subject to more abrupt or erratic market movements than larger, more established companies, because securities of smaller companies typically are traded in lower volume and the issuers typically are more subject to changes in earnings and prospects. Smaller capitalization companies often have limited product lines, markets or financial resources. They may be dependent on management for one or a few key persons, and can be more susceptible to losses and the risk of bankruptcy. In addition, securities of the small capitalization sector may be thinly traded (and therefore have to be sold at a discount from current market prices or sold in small lots over an extended period of time), may be followed by fewer investment research analysts and may be subject to wider price swings, and thus may create a greater chance of loss than by investing in securities of larger capitalization companies. FIXED-INCOME SECURITIES. (All Portfolios) Even though interest-bearing securities are investments which promise a stable stream of income, the prices of such securities generally are inversely affected by changes in interest rates and, therefore, are subject to the risk of market price fluctuations. Certain portfolio securities, such as those with interest rates that fluctuate directly or indirectly based on multiples of a stated index, are designed to be highly sensitive to changes in interest rates and can subject the holders thereof to extreme reductions of yield and possibly loss of principal. The values of fixed-income securities also may be affected by changes in the credit rating or financial condition of the issuer. Certain portfolio securities, such as those rated below investment grade by Standard & Poor's Ratings Services ("S&P") and Moody's Investors Service ("Moody's" and together with S&P, the "Rating Agencies"), may be subject to such risk with respect to the issuing entity and to greater market fluctuations than certain lower yielding, higher rated fixed-income securities. Once the rating of a portfolio security has been changed, the Portfolio will consider all circumstances deemed relevant in determining whether to continue to hold the security. MORTGAGE-RELATED SECURITIES. (Bond, High Yield, International Fixed-Income, Strategic Yield and Mortgage Portfolios) As with other interest-bearing securities, the prices of certain mortgage-related securities are inversely affected by changes in interest rates. However, although the value of a mortgage-related security may decline when interest rates rise, the converse is not necessarily true, since during periods of declining interest rates the mortgages 20 underlying the security are more likely to be prepaid. For this and other reasons, a mortgage-related security's stated maturity may be shortened by unscheduled prepayments on the underlying mortgages, and, therefore, it is possible that the realized return of the security may differ materially from the return originally expected by the Investment Manager. Moreover, with respect to certain stripped mortgage-backed securities, if the underlying mortgage securities experience greater than anticipated prepayments of principal, the Portfolio may fail to fully recoup its initial investment even if the securities are rated in the highest rating category by a nationally recognized statistical rating organization. During periods of rapidly rising interest rates, prepayments of mortgage-related securities may occur at slower than expected rates. Slower prepayments effectively may lengthen a mortgage-related security's expected maturity (but not past its stated maturity), which generally would cause the value of such security to fluctuate more widely in response to changes in interest rates. Were the prepayments on the Portfolio's mortgage-related securities to decrease broadly, the Portfolio's effective duration, and thus sensitivity to interest rate fluctuations, would increase. Commercial real property loans, however, often contain provisions that substantially reduce the likelihood that such securities will be prepaid. The provisions generally impose significant prepayment penalties on loans and in some cases there may be prohibitions on principal prepayments for several years following origination. Certain mortgage-related securities are subject to credit risks associated with the performance of the underlying mortgage properties. Adverse changes in economic conditions and circumstances are more likely to have an adverse impact on mortgage-related securities secured by loans on commercial properties than on those secured by loans on residential properties. In addition, as described above, these securities are subject to prepayment risk, although commercial mortgages typically have shorter maturities than residential mortgages and prepayment protection features. Some mortgage-related securities have structures that make their reactions to interest rate changes and other factors difficult to predict, making their values highly volatile. In certain instances, the credit risk associated with mortgage-related securities can be reduced by third party guarantees or other forms of credit support. Improved credit risk does not reduce prepayment risk which is unrelated to the rating assigned to the mortgage-related security. Prepayment risk can lead to fluctuations in value of the mortgage-related security which may be pronounced. If a mortgage-related security is purchased at a premium, all or part of the premium may be lost if the market value of the security declines whether resulting from changes in interest rates or prepayments on the underlying mortgage collateral. Certain mortgage-related securities, such as inverse floating rate collateralized mortgage obligations, have coupons that move inversely to a multiple of a specific index which may result in increased price volatility. FOREIGN SECURITIES. (All Portfolios, except the Small Cap and Mortgage Portfolios) Foreign securities markets generally are not as developed or efficient as those in the United States. Securities of some foreign issuers are less liquid and more volatile than securities of comparable U.S. issuers. Similarly, volume and liquidity in most foreign securities markets are less than in the United States and, at times, volatility of price can be greater than in the United States. 21 Because evidences of ownership of such securities usually are held outside the United States, the Portfolios will be subject to additional risks which include possible adverse political and economic developments, seizure or nationalization of foreign deposits and adoption of governmental restrictions, which might adversely affect or restrict the payment of principal and interest on the foreign securities to investors located outside the country of the issuer, whether from currency blockage or otherwise. With respect to the Emerging Markets, High Yield, International Fixed-Income and Strategic Yield Portfolios, emerging market countries have economic structures that generally are less diverse and mature, and political systems that are less stable, than those of developed countries. Emerging markets may be more volatile than the markets of more mature economies; however, such markets may provide higher rates of return to investors. Many emerging market countries providing investment opportunities for these Portfolios have experienced substantial, and in some periods extremely high, rates of inflation for many years. Inflation and rapid fluctuations in inflation rates have had and may continue to have adverse effects on the economies and securities markets of certain of these countries. Since foreign securities often are purchased with and payable in currencies of foreign countries, the value of these assets as measured in U.S. dollars may be affected favorably or unfavorably by changes in currency rates and exchange control regulations. FOREIGN CURRENCY TRANSACTIONS. (All Portfolios, except the Equity, Small Cap, Bond and Mortgage Portfolios) Currency exchange rates may fluctuate significantly over short periods of time. They generally are determined by the forces of supply and demand in the foreign exchange markets and the relative merits of investments in different countries, actual or perceived changes in interest rates and other complex factors, as seen from an international perspective. Currency exchange rates also can be affected unpredictably by intervention of U.S. or foreign governments or central banks, or the failure to intervene, or by currency controls or political developments in the United States or abroad. LOWER RATED SECURITIES. (Bond Portfolio, High Yield Portfolio, International Fixed-Income Portfolio and Strategic Yield Portfolio) Each of these Portfolios may invest in securities rated below investment grade such as those rated Ba by Moody's or BB by S&P, and as low as the lowest rating assigned by the Rating Agencies (commonly known as junk bonds). They may be subject to certain risks and to greater market fluctuations than lower yielding investment grade securities. See "Appendix" for a general description of the Rating Agencies' ratings. Although ratings may be useful in evaluating the safety of interest and principal payments, they do not evaluate the market value risk of these securities. The Portfolio will rely on the Investment Manager's judgment, analysis and experience in evaluating the creditworthiness of an issuer. You should be aware that the market values of many of these securities tend to be more sensitive to economic conditions than are higher rated securities and will fluctuate over time. These securities generally are considered by the Rating Agencies to be, on balance, predominantly speculative with respect to capacity to pay interest and repay principal in accordance with the terms of the obligation and generally will involve more credit risk than securities in the higher rating categories. 22 Companies that issue certain of these securities often are highly leveraged and may not have available to them more traditional methods of financing. Therefore, the risk associated with acquiring the securities of such issuers generally is greater than is the case with the higher rated securities. For example, during an economic downturn or a sustained period of rising interest rates, highly leveraged issuers of these securities may not have sufficient revenues to meet their interest payment obligations. The issuer's ability to service its debt obligations also may be affected adversely by specific corporate developments, forecasts, or the unavailability of additional financing. The risk of loss because of default by the issuer is significantly greater for the holders of these securities because such securities generally are unsecured and often are subordinated to other creditors of the issuer. Because there is no established retail secondary market for many of these securities, the Portfolio anticipates that such securities could be sold only to a limited number of dealers or institutional investors. To the extent a secondary trading market for these securities does exist, it generally is not as liquid as the secondary market for higher rated securities. The lack of a liquid secondary market may have an adverse impact on market price and yield and the Portfolio's ability to dispose of particular issues when necessary to meet the Portfolio's liquidity needs or in response to a specific economic event such as a deterioration in the creditworthiness of the issuer. The lack of a liquid secondary market for certain securities also may make it more difficult for the Portfolio to obtain accurate market quotations for purposes of valuing its portfolio and calculating its net asset value. Adverse publicity and investor perceptions, whether or not based on fundamental analysis, may decrease the values and liquidity of these securities. In such cases, judgment may play a greater role in valuation because less reliable, objective data may be available. These securities may be particularly susceptible to economic downturns. It is likely that an economic recession could disrupt severely the market for such securities and may have an adverse impact on the value of such securities. In addition, it is likely that any such economic downturn could adversely affect the ability of the issuers of such securities to repay principal and pay interest thereon and increase the incidence of default for such securities. The Portfolio may acquire these securities during an initial offering. Such securities may involve special risks because they are new issues. The Portfolio has no arrangement with any persons concerning the acquisition of such securities, and the Investment Manager will review carefully the credit and other characteristics pertinent to such new issues. The credit risk factors pertaining to lower rated securities also apply to lower rated zero coupon securities and pay-in-kind bonds, in which each of these Portfolios may invest. Pay-in-kind bonds pay interest through the issuance of additional securities. Zero coupon securities and pay-in-kind bonds carry an additional risk in that, unlike bonds which pay interest throughout the period to maturity, the Portfolio will realize no cash until the cash payment date unless a portion of such securities are sold and, if the issuer defaults, the Portfolio may obtain no return at all on its investment. STRATEGIC YIELD PORTFOLIO. During the year ended December 31, 2000, the percentages of the Strategic Yield Portfolio's assets invested in securities rated in particular rating categories by S&P were, on a weighted average basis, as follows: 23 Percentage of S&P Ratings Total Investment ----------- ---------------- TSY 0.3% AGY 34.0% AAA 17.2% AA 0.5% AA- 1.2% A+ 2.0% A 4.1% BBB+ 0.3% BBB 8.6% BBB- 0.7% BB+ 1.6% BB 2.6% BB- 1.5% B+ 3.7% B 4.2% B- 3.1% CCC+ 1.4% CCC 0.2% No Rating* 12.8% ----- 100.0% ---------------------- * The Investment Manager estimates these securities to have an average rating of BBB. The actual distribution of the Portfolio's investments by ratings on any given date will vary. In addition, the distribution of the Portfolio's investments by ratings as set forth above should not be considered as representative of the Portfolio's future investment portfolio composition. SIMULTANEOUS INVESTMENTS BY OTHER PORTFOLIOS OR FUNDS. (All Portfolios) Investment decisions for each Portfolio are made independently from those of the other portfolios and accounts managed by the Investment Manager. If, however, such other portfolios or accounts desire to invest in, or dispose of, the same securities as a Portfolio, available investments or opportunities for sales will be allocated equitably to each. In some cases, this procedure may adversely affect the size of the position obtained for or disposed of by a Portfolio or the price paid or received by a Portfolio. INVESTMENT RESTRICTIONS Each Portfolio's investment objective is a fundamental policy, which cannot be changed without approval by the holders of a majority (as defined in the 1940 Act) of the Portfolio's outstanding voting shares. In addition, the Portfolios (except as noted) have adopted investment restrictions numbered (i) through (xii) as fundamental policies. However, the amendment of these restrictions to add an additional Portfolio, which amendment does not substantively affect the restrictions with respect to an existing Portfolio, will not require approval as described in the first sentence. Investment restrictions numbered (xiii) through (xviii) are not fundamental policies and may be changed, as to a Portfolio, by vote of a majority of the Fund's Board members at any time. A Portfolio's 80% investment requirement as described in the 24 Prospectus (if applicable) is not a fundamental policy of the Portfolio and may be changed without shareholder approval; however, this policy will not be changed without providing shareholders at least 60 days' prior written notice of such change. None of the Portfolios may: (i) issue senior securities, borrow money or pledge or mortgage its assets, except that (A) each Portfolio may borrow from banks for temporary purposes, including the meeting of redemption requests which might require the untimely disposition of securities, as described in the Prospectus, (B) each of the Mid Cap Portfolio, Global Equity Portfolio, International Small Cap Portfolio, Emerging Markets Portfolio, International Equity Select Portfolio and High Yield Portfolio also may borrow money to the extent permitted under the 1940 Act; provided, however, that the Portfolio will not make new investments to the extent borrowings exceed 5% of its total assets, except for borrowings covered within the interpretations of Sections 18(f) of the 1940 Act, and (C) the Equity Portfolio may additionally utilize leverage as described in the Prospectus. For purposes of this investment restriction, a Portfolio's entry into options, forward contracts, futures contracts, including those related to indexes, shall not constitute borrowing; (ii) make loans, except loans of portfolio securities not having a value in excess of 33-1/3% (10% in the case of the Equity Portfolio, Small Cap Portfolio, International Equity Portfolio, Bond Portfolio, International Fixed-Income Portfolio and Strategic Yield Portfolio) of a Portfolio's total assets and except that each Portfolio may purchase debt obligations in accordance with its investment objectives and policies; (iii) for all Portfolios except the Mid Cap Portfolio, Global Equity Portfolio, International Equity Select Portfolio, High Yield Portfolio and Mortgage Portfolio, invest in illiquid securities as defined in "Investment Objectives and Management Policies--Illiquid Securities" if immediately after such investment more than 10% of the value of the Portfolio's net assets, or, in the case of the Equity Portfolio, more than 10% of the value of that Portfolio's total assets, taken at market value, would be invested in such securities; (iv) for the Equity Portfolio, Small Cap Portfolio, International Equity Portfolio, Bond Portfolio, International Fixed-Income Portfolio and Strategic Yield Portfolio, (A) purchase securities of other investment companies, except in connection with a merger, consolidation, acquisition or reorganization; and (B) the Equity Portfolio, Small Cap Portfolio and International Equity Portfolio may purchase securities in an amount up to 5% of the value of the Portfolio's total assets in any one closed-end fund and may purchase in the aggregate securities of closed-end funds in an amount of up to 10% of the value of the Portfolio's total assets; 25 (v) purchase the securities of issuers conducting their principal business activity in the same industry if, immediately after the purchase and as a result thereof, the value of the Portfolio's investments in that industry would exceed 25% of the current value of such Portfolio's total assets, provided that there is no limitation with respect to investments in obligations of the U.S. Government, its agencies or instrumentalities; (vi) (A) purchase or sell real estate or real estate limited partnerships, except that a Portfolio may purchase and sell securities of companies which deal in real estate or interests therein and the Mid Cap Portfolio, Global Equity Portfolio, International Small Cap Portfolio, Emerging Markets Portfolio, International Equity Select Portfolio, High Yield Portfolio and Mortgage Portfolio also may purchase and sell securities that are secured by real estate; (B) purchase or sell commodities or commodity contracts (except that the Mid Cap Portfolio, Global Equity Portfolio, International Small Cap Portfolio, Emerging Markets Portfolio, International Equity Select Portfolio, High Yield Portfolio and Mortgage Portfolio may purchase and sell swaps, options, forward contracts, futures contracts, including those relating to indices, and options on futures contracts or indices, the Mid Cap Portfolio, International Equity Portfolio, International Equity Select Portfolio, High Yield Portfolio, International Fixed-Income Portfolio and Strategic Yield Portfolio may purchase or sell foreign currency forward exchange contracts, the Bond Portfolio and International Fixed-Income Portfolio may enter into futures contracts and options on futures contracts, the International Fixed-Income Portfolio may enter into futures contracts on foreign currencies and the International Fixed-Income Portfolio and Strategic Yield Portfolio may purchase and write put and call options on foreign currencies); and (C) for all Portfolios except the Equity Portfolio, Mid Cap Portfolio, Global Equity Portfolio, High Yield Portfolio, International Equity Select Portfolio and Mortgage Portfolio, invest in interests in or leases relating to oil, gas, or other mineral exploration or development programs; (vii) purchase securities on margin (except for short-term credits necessary for the clearance of transactions) or, except for the Mid Cap Portfolio, Global Equity Portfolio, International Equity Select Portfolio, High Yield Portfolio and Mortgage Portfolio, make short sales of securities; (viii) underwrite securities of other issuers, except to the extent that the purchase of municipal obligations or other permitted investments directly from the issuer thereof or from an underwriter for an issuer and the later disposition of such securities in accordance with the Portfolio's investment program may be deemed to be an underwriting; (ix) for the Equity Portfolio, Small Cap Portfolio, International Equity Portfolio, Bond Portfolio, International Fixed-Income Portfolio and Strategic Yield Portfolio, make investments for the purpose of exercising control or management; 26 (x) for the Equity Portfolio, purchase restricted securities, which are securities that must be registered under the Securities Act before they may be offered or sold to the public, except that the Equity Portfolio may invest up to 5% of the value of its total assets, taken at cost, in such securities; (xi) for the Equity Portfolio, invest more than 5% of the current value of its total assets in the securities of any one issuer, other than obligations of the United States Government, its agencies or instrumentalities or securities which are backed by the full faith and credit of the United States; (xii) for the Equity Portfolio, purchase securities of an issuer if, as a result, as to 75% of the Portfolio's total assets, the Portfolio would own more than 10% of the voting securities of such issuer; * * * (xiii) for the Mid Cap Portfolio, Global Equity Portfolio, International Small Cap Portfolio, Emerging Markets Portfolio, International Equity Select Portfolio and High Yield Portfolio, pledge, hypothecate, mortgage or otherwise encumber its assets other than to secure permitted borrowings; (xiv) for the Mid Cap Portfolio, Global Equity Portfolio, International Equity Select Portfolio, High Yield Portfolio and Mortgage Portfolio, invest in illiquid securities as defined in "Investment Objectives and Management Policies--Illiquid Securities" if immediately after such investment more than 10% (15% in the case of the Mid Cap Portfolio, International Equity Select Portfolio and High Yield Portfolio) of the value of the Portfolio's net assets would be invested in such securities; (xv) for the Mid Cap Portfolio, Global Equity Portfolio, International Small Cap Portfolio, Emerging Markets Portfolio, International Equity Select Portfolio, High Yield Portfolio and Mortgage Portfolio, purchase securities of other investment companies, except to the extent permitted under the 1940 Act; (xvi) for the Equity Portfolio, Mid Cap Portfolio, Global Equity Portfolio, International Equity Select Portfolio, High Yield Portfolio and Mortgage Portfolio, invest in interests in or leases relating to oil, gas, or other mineral exploration or development programs; (xvii) for the Global Equity Portfolio and International Equity Select Portfolio, make short sales of securities; or (xviii) for the Global Equity Portfolio, International Small Cap Portfolio and Emerging Markets Portfolio, make investments for the purpose of exercising control or management. * * * 27 If a percentage restriction is adhered to at the time of investment, a later change in percentage resulting from a change in values or assets will not constitute a violation of such restriction. With respect to Investment Restriction No. (i), however, if borrowings exceed 33-1/3% of the value of a Portfolio's total assets as a result of a change in values or assets, the Portfolio must take steps to reduce such borrowings at least to the extent of such excess within three business days. With respect to Investment Restriction No. (v), each Portfolio will limit investments in securities of issuers conducting their principal business activity in the same industry to less than 25% of the current value of its total assets (immediately after purchase and as a result thereof), provided that there is no limitation on the purchase of obligations issued or guaranteed by the U.S. Government, its agencies or instrumentalities. MANAGEMENT The Fund's Board is responsible for the management and supervision of each Portfolio. The Board approves all significant agreements with those companies that furnish services to the Portfolios. These companies are as follows: Lazard Asset Management...............Investment Manager Lazard Freres & Co. LLC...............Distributor Boston Financial Data Services, Inc...Transfer Agent and Dividend Disbursing Agent State Street Bank and Trust Company...Custodian The Directors and officers of the Fund and their principal occupations during the past five years are set forth below. Unless otherwise specified, the address of each of the following persons is 30 Rockefeller Plaza, New York, New York 10112.
NAME, ADDRESS AND AGE POSITION WITH FUND PRINCIPAL OCCUPATION DURING PAST 5 YEARS -------------------------------------- --------------------------- --------------------------------------------------- Norman Eig* (60) Chairman of the Board Vice Chairman and Managing Director (formerly General Partner), Lazard. Herbert W. Gullquist* (63) President, Director Vice Chairman and Managing Director (formerly General Partner), Lazard; Chief Investment Officer of the Investment Manager. John J. Burke (72) Director Retired; Former Vice Chairman and Director, 50 Burning Tree Lane Montana Power Company. Butte, MT 59701
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NAME, ADDRESS AND AGE POSITION WITH FUND PRINCIPAL OCCUPATION DURING PAST 5 YEARS -------------------------------------- --------------------------- --------------------------------------------------- Kenneth S. Davidson (56) Director President, Davidson Capital Management Davidson Capital Management Corporation; Director, Blackthorn Fund N.V. and Corporation Ottertail Valley Railroad. 500 Park Avenue Suite 510 New York, NY 10022 Carl Frischling* (64) Director Senior Partner, Kramer, Levin, Naftalis & Kramer, Levin, Naftalis & Frankel LLP, attorneys at law. Frankel LLP 919 Third Avenue New York, NY 10022 Lester Z. Lieberman (70) Director Private Investor; Director of Dowel Associates; 1500 Mt. Kemble Avenue Chairman of the Board of Trustees of Newark Beth Morristown, NJ 07960 Israel Medical Center and Irvington General Hospital; Member of the New Jersey State Investment Council. Richard Reiss, Jr. (57) Director Managing Partner, Georgica Advisors LLC, an Georgica Advisors LLC investment manager. Carnegie Hall Tower 152 West 57th Street, 46th Floor New York, NY 10019 John Rutledge*(52) Director President, Rutledge Capital, an economics and Rutledge Capital investment advisory firm; Chairman, Claremont 15 Locust Avenue Economics Institute. New Canaan, CT 06840 William Katz (47) Director President and Co-Chief Executive Officer of BBDO BBDO Worldwide Network New York, an advertising agency; Director of BBDO 1285 Avenue of the Americas Worldwide. New York, NY 10019 David M. Goldenberg (34) Vice President, Secretary Director, Legal Affairs of the Investment Manager; from April 1998 to May 2000, Global Director of Compliance for SSB Citi Asset Management Group; from June 1996 to April 1998, Associate General Counsel of Smith Barney Asset Management; prior thereto, Branch Chief and Senior Counsel in the Division of Investment Management at the Securities and Exchange Commission in Washington, D.C.
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NAME, ADDRESS AND AGE POSITION WITH FUND PRINCIPAL OCCUPATION DURING PAST 5 YEARS -------------------------------------- --------------------------- --------------------------------------------------- Bernard J. Grzelak (29) Treasurer Vice President of the Investment Manager; from August 1993 to September 2000, a Manager with Deloitte & Touche LLP Nathan A. Paul (28) Assistant Secretary Vice President, Legal Affairs of the Investment Manager; from September 1997 to October 2000, an Associate at Schulte Roth & Zabel LLP; prior thereto, a student at Cardozo Law School. Stephen St. Clair (42) Assistant Treasurer Transfer Agent Operations Manager of the Investment Manager; prior to June 1997, Associate Director of Mutual Fund Operations at Furman Selz and its successor, BISYS Fund Services.
----------- *An "interested person" of the Fund as defined in the 1940 Act. The Fund has a standing nominating committee comprised of its Directors who are not "interested persons" of the Fund, as defined in the 1940 Act. The function of the nominating committee is to select and nominate all candidates who are not "interested persons" of the Fund for election to the Fund's Board. Each Director who is not an employee or an affiliated person of the Investment Manager is paid an annual fee of $30,000, plus $2,500 per meeting attended, for the Fund and another multi-portfolio fund advised by the Investment Manager, and is reimbursed for travel and other out of pocket expenses. In addition, the Chairman of the Audit Committee for the Fund and Lazard Retirement Series, Inc. also receives an annual fee of $5,000. The aggregate amount of compensation paid to each Director by the Fund for the year ended December 31, 2000, was as follows:
TOTAL COMPENSATION FROM AGGREGATE COMPENSATIN FROM THE FUND AND NAME OF DIRECTOR THE FUND LAZARD RETIREMENT SERIES, INC. ---------------- -------------------------- ------------------------------ John J. Burke $ 42,825 $ 45,000 Kenneth S. Davidson $ 42,825 $ 45,000 Norman Eig N/A N/A Carl Frischling $ 38,499 $ 40,000 Herbert W. Gullquist N/A N/A William Katz $ 40,992 $ 42,500 Lester Z. Lieberman $ 45,970 $ 47,500 Richard Reiss, Jr. $ 42,825 $ 45,000 John Rutledge $ 40,338 $ 42,500
30 The Fund does not compensate officers or Directors who are employees or affiliated persons of the Investment Manager. As of April 6, 2001, the Fund's officers and Directors, as a group, owned less than 1% of the shares of each Portfolio. INVESTMENT MANAGER AND INVESTMENT MANAGER AGREEMENTS Lazard Asset Management, 30 Rockefeller Plaza, New York, New York 10112, has entered into an investment management agreement (the "Management Agreement") with the Fund on behalf of each Portfolio. Pursuant to each Management Agreement, Lazard Asset Management regularly provides each Portfolio with investment research, advice and supervision and furnishes continuously an investment program for each Portfolio consistent with its investment objectives and policies, including the purchase, retention and disposition of securities. Lazard Asset Management is a division of Lazard Freres & Co. LLC, a New York limited liability company, which is registered as an investment adviser with the Commission and is a member of the New York, American and Chicago Stock Exchanges. Lazard provides its clients with a wide variety of investment banking and related services, including investment management. It is an underwriter of corporate securities, conducts a broad range of trading and brokerage activities in corporate and governmental bonds and stocks and acts as a financial adviser to utilities. Lazard Asset Management and its affiliates provide investment management services to client discretionary accounts with assets as of December 31, 2000 totaling approximately $71.1 billion. Its clients are both individuals and institutions, some of whose accounts have investment policies similar to those of several of the Portfolios. The Fund, Lazard Asset Management and Lazard each have adopted a Code of Ethics that permits its personnel, subject to such Code, to invest in securities, including securities that may be purchased or held by a Portfolio. The Lazard Asset Management Code of Ethics restricts the personal securities transactions of its employees, and requires portfolio managers and other investment personnel to comply with the Code's preclearance and disclosure procedures. Its primary purpose is to ensure that personal trading by Lazard Asset Management employees does not disadvantage any Portfolio Under the terms of the Management Agreement, the Investment Manager will pay the compensation of all personnel of the Fund, except the fees of the Directors of the Fund who are not employees or affiliated persons of the Investment Manager. The Investment Manager will make available to the Portfolios such of the Investment Manager's members, directors, officers and employees as are reasonably necessary for the operations of each Portfolio, or as may be duly elected officers or directors of the Fund. Under each Management Agreement, the Investment Manager also pays each Portfolio's office rent and provides investment advisory research and statistical facilities and all clerical services relating to research, statistical and investment work. The Investment Manager, including its employees who serve the Portfolios, may render investment advice, management and other services to others. As compensation for its services, each of the Portfolios has agreed to pay the Investment Manager an investment management fee, accrued daily and payable monthly, at the 31 annual rates set forth below as a percentage of the average daily value of the net assets of the relevant Portfolio: NAME OF PORTFOLIO INVESTMENT MANAGEMENT FEE PAYABLE ----------------- --------------------------------- Equity Portfolio .75% Mid Cap Portfolio .75% Small Cap Portfolio .75% Global Equity Portfolio .75% International Equity Portfolio .75% International Small Cap Portfolio .75% International Equity Select Portfolio .85% Emerging Markets Portfolio 1.00% Bond Portfolio .50% High Yield Portfolio .75% International Fixed-Income Portfolio .75% Strategic Yield Portfolio .75% Mortgage Portfolio .40% For the fiscal year ending December 31, 2001, the Investment Manager has agreed to waive its management fees or otherwise bear the expenses of the following Portfolios to the extent the aggregate expenses of the Portfolios exceed the percentage of the value of the Portfolio's average daily net assets set forth opposite the Portfolio's name: MAXIMUM TOTAL PORTFOLIO OPERATING EXPENSES NAME OF PORTFOLIO INSTITUTIONAL SHARES OPEN SHARES ------------------ ----------------------- ----------------- Mid Cap Portfolio 1.05% 1.35% Global Equity Portfolio 1.05% 1.35% International Small Cap Portfolio N/A 1.43% Emerging Markets Portfolio N/A 1.60% Bond Portfolio N/A 1.10% High Yield Portfolio .75% 1.05% International Fixed-Income Portfolio 1.09% 1.35% Mortgage Portfolio .65% N/A For the fiscal years ended December 31, 1998, 1999 and 2000, the management fees payable by each operational Portfolio, the amounts waived by the Investment Manager and the net fees paid to the Investment Manager were as follows:
FEE PAYABLE FOR FISCAL FEE PAYABLE FOR FISCAL FEE PAYABLE FOR FISCAL YEAR ENDED DECEMBER 31, YEAR ENDED DECEMBER 31, YEAR ENDED DECEMBER 31, NAME OF PORTFOLIO 1998 1999 2000 ----------------- ---------------------- ----------------------- ----------------------- Equity Portfolio $ 3,316,469 $ 3,998,410 $ 2,581,415 Mid Cap Portfolio $ 459,760 $ 445,394 $ 211,418 Small Cap Portfolio $ 11,726,934 $ 9,055,989 $ 6,566,031 Global Equity Portfolio $ 119,985 $ 432,935 $ 697,033 International Equity Portfolio $ 19,452,067 $ 24,275,244 $ 25,120,125 International Small Cap Portfolio $ 1,354,903 $ 1,424,719 $ 2,208,823
32 Emerging Markets Portfolio $ 2,794,119 $ 3,643,706 $ 3,820,972 Bond Portfolio $ 523,656 $ 570,987 $ 403,761 High Yield Portfolio $ 225,562 $ 583,680 $ 702,233 International Fixed-Income Portfolio $ 857,644 $ 752,225 $ 569,894 Strategic Yield Portfolio $ 3,422,135 $ 2,647,590 $ 2,248,959 Mortgage Portfolio N/A N/A $ 3
33
REDUCTION IN REDUCTION IN REDUCTION IN FEE FOR FISCAL FEE FOR FISCAL FEE FOR FISCAL YEAR ENDED YEAR ENDED DECEMBER 31, YEAR ENDED DECEMBER 31, NAME OF PORTFOLIO DECEMBER 31, 1998 1999 2000 ----------------- ------------------- ---------------------- ----------------------- Equity Portfolio -0- -0- Mid Cap Portfolio $ 119,681 $ 136,299 Small Cap Portfolio -0- -0- -0- Global Equity Portfolio $ 119,985 $ 111,760 $ 24,866 International Equity Portfolio -0- -0- -0- International Small Cap Portfolio $ 16,356 $ 18,247 $ 18,438 Emerging Markets Portfolio $ 17,870 $ 13,643 $ 17,500 Bond Portfolio $ 11,309 $ 7,051 $ 17,519 High Yield Portfolio $ 107,939 $ 91,037 $ 249,229 International Fixed-Income Portfolio $ 21,538 $ 66,314 $ 87,985 Strategic Yield Portfolio -0- -0- -0- Mortgage Portfolio N/A N/A $ 4,684
NET FEE PAID FOR FISCAL NET FEE PAID FOR FISCAL NET FEE PAID FOR FISCAL YEAR ENDED DECEMBER 31, YEAR ENDED DECEMBER 31, YEAR ENDED DECEMBER 31, NAME OF PORTFOLIO 1998 1999 2000 ----------------- ----------------------- ---------------------- ----------------------- Equity Portfolio $ 3,316,469 $ 3,998,410 $ 2,581,415 Mid Cap Portfolio $ 340,079 $ 362,986 $ 75,119 Small Cap Portfolio $ 11,726,934 $ 9,055,989 $ 6,566,031 Global Equity Portfolio -0- $ 321,175 $ 672,167 International Equity Portfolio $ 19,452,067 $ 24,275,244 $ 25,120,125 International Small Cap Portfolio $ 1,338,547 $ 1,406,472 $ 2,190,385 Emerging Markets Portfolio $ 2,776,249 $ 3,630,063 $ 3,803,472 Bond Portfolio $ 512,347 $ 563,936 $ 386,242 High Yield Portfolio $ 117,623 $ 492,643 $ 453,004 International Fixed-Income Portfolio $ 836,106 $ 685,911 $ 481,909 Strategic Yield Portfolio $ 3,422,135 $ 2,647,590 $ 2,248,959 Mortgage Portfolio N/A N/A $ (4,681)
Each Management Agreement provides that the relevant Portfolio pays all of its expenses that are not specifically assumed by the Investment Manager. Expenses attributable to each Portfolio will be charged against the assets of that Portfolio. Other expenses of the Fund will be allocated among the Portfolios in a manner which may, but need not, be proportionate in relation to the net assets of each Portfolio. Expenses payable by each of the Portfolios include, but are not limited to, clerical salaries, brokerage and other expenses of executing portfolio transactions; legal, auditing or accounting expenses; trade association dues; taxes or governmental fees; the fees and expenses of any person providing administrative services to the Fund; the fees and expenses of the custodian and transfer agent of the Fund; clerical expenses 34 of issue, redemption or repurchase of shares of the Portfolio; the expenses and fees for registering and qualifying securities for sale; the fees of Directors of the Fund who are not employees or affiliated persons of the Investment Manager or its affiliates; travel expenses of all Directors, officers and employees; insurance premiums; and the cost of preparing and distributing reports and notices to shareholders. In addition, the Open Shares of each Portfolio are subject to an annual distribution and servicing fee. See "Distribution and Servicing Plan." The organizational expenses of the Fund are being amortized and allocated among the MidCap, Global Equity, Bond and High Yield Portfolios. Each Management Agreement is subject to annual approval by (i) the Fund's Board or (ii) vote of a majority (as defined in the 1940 Act) of the outstanding voting securities of the relevant Portfolio, provided that in either event the continuance also is approved by a majority of the Directors who are not "interested persons" (as defined in the 1940 Act) of the Fund or the Investment Manager, by vote cast in person at a meeting called for the purpose of voting on such approval. Each Management Agreement is terminable without penalty, on 60 days' notice, by the Fund's Board or by vote of the holders of a majority of the shares of such Portfolio, or, upon not less than 60 days' notice, by the Investment Manager. Each Management Agreement provides for automatic termination in the event of its assignment (as defined in the 1940 Act). Each Management Agreement provides that in the absence of willful misfeasance, bad faith or gross negligence on the part of the Investment Manager, or of reckless disregard of its obligations thereunder, the Investment Manager shall not be liable for any action or failure to act in accordance with its duties thereunder. ADMINISTRATOR AND CUSTODIAN The Fund has engaged State Street Bank and Trust Company ("State Street"), 225 Franklin Street, Boston, Massachusetts 02110, to provide certain administrative services to the Portfolios. Each Portfolio will bear the cost of such administrative expenses at the annual rate of $37,500 plus $7,500 per additional class, and .02% of the value of the average daily net assets of the Portfolio up to $1 billion and .01% of such assets over $1 billion. State Street has agreed to waive the $37,500 fee for the Mortgage Portfolio until June 30, 2001 or until the Portfolio reaches net assets of $50 million, whichever comes first. State Street also acts as the Fund's custodian. As the Fund's custodian, State Street, among other things, maintains a custody account or accounts in the name of each Portfolio; receives and delivers all assets for each Portfolio upon purchase and upon sale or maturity; collects and receives all income and other payments and distributions on account of the assets of each Portfolio and disburses the Portfolio's assets in payment of its expenses. The custodian does not determine the investment policies of any Portfolio or decide which securities any Portfolio will buy or sell. DISTRIBUTOR Lazard serves as the distributor of each Portfolio's shares and conducts a continuous offering pursuant to a "best efforts" arrangement. As the distributor, it accepts purchase and redemption orders for Portfolio shares. In addition, the distribution agreement obligates Lazard to pay certain expenses in connection with the offering of Portfolio shares. 35 After the prospectus and periodic reports have been prepared, set in type and mailed to shareholders, Lazard also will pay for the printing and distribution of copies thereof used in connection with the offering to prospective investors. DETERMINATION OF NET ASSET VALUE Net asset value per share for each Class of each Portfolio is determined by State Street for the Fund on each day the New York Stock Exchange is open for trading. The New York Stock Exchange is ordinarily closed on the following national holidays: New Year's Day, Martin Luther King Jr. Day, Presidents' Day, Good Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving Day and Christmas Day. Net asset value per share is determined by dividing the value of the total assets of the Portfolio represented by such Class, less all liabilities, by the total number of Portfolio shares of such Class outstanding. The value of securities, other than options listed on national securities exchanges and debt securities maturing in 60 days or less, is determined as of the close of regular trading on the New York Stock Exchange. Options on stock and stock indices traded on national securities exchanges are valued as of the close of options trading on such exchanges (which is normally 4:10 p.m., Eastern time). Debt securities maturing in 60 days or less are valued at amortized cost, except where to do so would not reflect accurately their fair value, in which case such securities would be valued at their fair value as determined under the supervision of the Board of Directors. Each security for which the primary market is on a national securities exchange is valued at the last sale price on the principal exchange on which it is traded, or, if no sales are reported on such exchange on that day, at the closing bid price. Any security held by a Portfolio for which the primary market is the NASDAQ National Market System is valued at the last sale price as quoted by such system or, in the absence of any sale on the valuation date, at the closing bid price. Any other unlisted security for which current over-the-counter market quotations or bids are readily available is valued at its last quoted bid price or, if available, the mean of two such prices. All other securities and other assets for which current market quotations are not readily available are valued at fair value as determined in good faith by the Fund's Board of Directors and in accordance with procedures adopted by the Board of Directors. The portfolio securities of any of the Portfolios also may be valued on the basis of prices provided by a pricing service when such prices are believed by the Investment Manager to reflect the fair market value of such securities. The Small Cap Portfolio and International Small Cap Portfolio invest primarily in equity securities of companies with relatively small market capitalizations. Because of the difference between the bid and asked prices of over-the-counter securities, there may be an immediate reduction in the net asset value of the shares of the Small Cap Portfolio or International Small Cap Portfolio after such Portfolio has completed a purchase of securities that will be valued by the relevant Portfolio at their bid price, since those securities usually will have been purchased at or near the asked price. 36 Trading in securities on European and Far Eastern securities exchanges and over-the-counter markets ordinarily is completed well before the close of business on each business day in New York (i.e., a day on which the New York Stock Exchange is open). In addition, European or Far Eastern securities trading generally or in a particular country or countries may not take place on all business days in New York. Furthermore, trading takes place in Japanese markets on certain Saturdays and in various foreign markets on days which are not business days in New York and on which the net asset value of a Portfolio is not calculated. Each Portfolio calculates net asset value per share, and therefore effects sales, redemptions and repurchases of its shares, as of the close of regular trading on the New York Stock Exchange once on each day on which the New York Stock Exchange is open. Such calculation may not take place contemporaneously with the determination of the prices of the majority of the portfolio securities used in such calculation. If events materially affecting the value of such securities occur between the time when their price is determined and the time when the Portfolio's net asset value is calculated, such securities will be valued at fair value as determined in good faith by the Board of Directors. PORTFOLIO TRANSACTIONS GENERAL Subject to the supervision of the Board of Directors, the Investment Manager is primarily responsible for the investment decisions and the placing of portfolio transactions for each Portfolio. In selecting brokers or dealers to execute portfolio transactions on behalf of a Portfolio, the Investment Manager seeks the best overall terms available, taking into account such factors as price, size of order, difficulty of execution and skill required of the executing broker. While the Investment Manager will generally seek reasonably competitive spreads or commissions, the Portfolios will not necessarily be paying the lowest spread or commission available. Purchases and sales of portfolio securities on a securities exchange are effected by the Investment Manager through brokers who charge a negotiated commission for their services based on the quality and quantity of execution services provided by the broker in the light of generally prevailing rates. Orders may be directed to any broker including, to the extent and in the manner permitted by applicable law, Lazard. In the over-the-counter market, securities are generally traded on a "net" basis with dealers acting as principal for their own accounts without a stated commission, although the price of the security usually includes a profit to the dealer. In underwritten offerings, securities are purchased at a fixed price that includes an amount of compensation to the underwriter, generally referred to as the underwriter's concession or discount. To the extent consistent with applicable provisions of the 1940 Act and the rules adopted by the Commission thereunder, the Fund's Board has determined that securities transactions for a Portfolio may be executed through Lazard if, in the judgment of the Investment Manager, the use of Lazard is likely to result in price and execution at least as favorable as those of other qualified brokers or dealers, and if, in the transaction, Lazard charges the Portfolio a rate consistent with that charged to comparable unaffiliated customers in similar transactions. Purchase and sale orders for securities held by a Portfolio may be combined with those for other 37 Portfolios in the interest of the most favorable net results for all. When the Investment Manager determines that a particular security should be bought for or sold by more than one Portfolio, the Investment Manager undertakes to allocate those transactions between the participants equitably. The Portfolios listed below held securities of their regular brokers or dealers during the fiscal year ended December 31, 2000:
Portfolio Broker/Dealer Value on 12/31/00 (in $000s) ----------------- ------------------------------ ------------------------------ Equity Portfolio Chase Manhattan Corp. $ 7,512 Citigroup Inc. $10,534 Morgan Stanley Dean Witter & Co. $ 3,852 Global Equity Portfolio Chase Manhattan Corp. $ 1,818 BNP Paribas SA $ 1,417 San Paolo-IMI SpA $ 1,384 ING Groep NV $ 2,157 HSBC Holdings PLC $ 2,129 Citigroup Inc. $ 1,922 International Equity Portfolio BNP Paribas SA $34,954 ING Groep NV $89,956 San Paolo-IMI SpA $38,982 HSBC Holdings PLC $58,379 Bond Portfolio Lehman Brothers $ 530 Morgan Stanley Dean Witter & Co. $ 1,988 Merrill Lynch Pierce Fenner & Smith Inc. $ 919 Citigroup Inc. $ 1,130 Bear Stearns & Co. Inc. $ 425 Salomon Smith Barney Inc. $ 625 PaineWebber Inc. $ 524 International Fixed-Income Portfolio Merrill Lynch Pierce Fenner & Smith Inc. $ 749 Citigroup Inc. $ 2,935 Salomon Smith Barney Inc. $ 112 Deutsche Bank Securities Inc. $ 390 Strategic Yield Portfolio Chase Manhattan Corp. $ 7,059 Merrill Lynch Pierce Fenner & Smith Inc. $ 328 Salomon Smith Barney Inc. $ 3,439 Morgan Stanley Dean Witter & Co. $ 279 Citigroup Inc. $ 9,878 Deutsche Bank Securities Inc. $ 4,488
38 RESEARCH AND STATISTICAL INFORMATION When it can be done consistently with the policy of obtaining the best overall terms available, the Investment Manager may select brokers or dealers who supply market quotations to the Fund's custodian for valuation purposes; who supply research, market and statistical information to the Investment Manager; or based upon their sale of shares of the Fund or other funds advised by the Investment Manager. Although such research, market and statistical information may be useful to the Investment Manager, it is only supplementary to the Investment Manager's own research efforts, since the information must still be analyzed, weighed and reviewed by the Investment Manager's staff. Information so received will be in addition to, and not in lieu of, the services required to be performed by the Investment Manager under the Management Agreement with the Fund on behalf of the Portfolios. Such information may be useful to the Investment Manager in providing services to both the Portfolios and clients other than the Portfolios, and, conversely, supplemental information obtained by the placement of business of other clients may be useful to the Investment Manager in carrying out its obligations to the Portfolios. The total dollar amount of transactions pursuant to which brokerage was directed in consideration of research services provided during the year ended December 31, 2000, was $830,480,748, and the related commissions were $1,730,313. In addition, when it can be done consistently with the above stated policy, the Investment Manager may place orders with brokers and dealers (i) who refer persons to the Investment Manager for the purpose of purchasing shares of the Portfolios or (ii) who provide services to the Fund at no fee or for a reduced fee. BROKERAGE COMMISSIONS In connection with its portfolio securities transactions for the fiscal years ended December 31, 1998, 1999 and 2000, each Portfolio indicated below paid brokerage commissions as follows: YEAR ENDED DECEMBER 31, 1998
PERCENTAGE OF TOTAL AMOUNT OF PERCENTAGE OF BROKERAGE TOTAL BROKERAGE TOTAL BROKERAGE TRANSACTIONS BROKERAGE COMMISSIONS PAID COMMISSIONS PAID EFFECTED THROUGH NAME OF PORTFOLIO COMMISSIONS PAID TO LAZARD TO LAZARD LAZARD ----------------- ---------------- ---------------- --------------- ------------------ Equity Portfolio $ 802,204 $51,625 6.44% 7.24% Mid Cap Portfolio $ 183,975 $ 5,270 2.86% 2.73% Small Cap Portfolio $ 2,544,527 $61,090 2.40% 0.95% Global Equity Portfolio $ 33,371 $ 2,734 8.19% 14.52% International Equity Portfolio $ 4,724,137 -0- -0- -0- International Small Cap Portfolio $ 439,572 -0- -0- -0- Emerging Markets Portfolio $ 1,016,826 $ 812 0.07% 0.39%
39 YEAR ENDED DECEMBER 31, 1999
PERCENTAGE OF TOTAL AMOUNT OF PERCENTAGE OF BROKERAGE TOTAL BROKERAGE TOTAL BROKERAGE TRANSACTIONS BROKERAGE COMMISSIONS PAID COMMISSIONS PAID EFFECTED THROUGH NAME OF PORTFOLIO COMMISSIONS PAID TO LAZARD TO LAZARD LAZARD ------------------ ------------------ ---------------- ---------------- ------------------ Equity Portfolio $ 750,127 $ 85,635 11.55% 11.57% Mid Cap Portfolio $ 269,337 $ 6,660 2.47% 3.52% Small Cap Portfolio $ 3,071,242 $ 1,170 0.04% 0.05% Global Equity Portfolio $ 103,696 $ 3,931 3.79% 14.43% International Equity Portfolio $ 4,225,656 -0- -0- -0- International Small Cap Portfolio $ 391,980 -0- -0- -0- Emerging Markets Portfolio $ 868,520 -0- -0- -0-
YEAR ENDED DECEMBER 31, 2000 PERCENTAGE OF TOTAL
AMOUNT OF PERCENTAGE OF BROKERAGE BROKERAGE TOTAL BROKERAGE TRANSACTIONS TOTAL BROKERAGE COMMISSIONS PAID COMMISSIONS PAID EFFECTED THROUGH NAME OF PORTFOLIO COMMISSIONS PAID TO LAZARD TO LAZARD LAZARD ----------------- ------------------ ----------------- ---------------- ----------------- Equity Portfolio $ 529,444 $ 18,910 3.57% 5.39% Mid Cap Portfolio $ 182,719 $ 6,495 3.55% 3.07% Small Cap Portfolio $ 2,764,171 -0- -0- -0- Global Equity Portfolio $ 162,680 $ 5,002 3.07% 10.56% International Equity Portfolio $ 6,512,075 -0- -0- -0- International Small Cap Portfolio $ 737,324 -0- -0- -0- Emerging Markets Portfolio $ 1,388,540 $ 275 0.02% 0.15%
HOW TO BUY AND HOW TO SELL SHARES GENERAL. The minimum initial investment for each Portfolio is $10,000 for Open Shares (except for the Mortgage Portfolio, which only offers Institutional Shares), unless the investor is a client of a securities dealer or other institution which has made an aggregate minimum initial purchase for its clients of at least $10,000, and $1,000,000 for Institutional Shares. The minimum investment requirements may be waived or lowered for investments effected through banks and other institutions that have entered into special arrangements with the Fund or Lazard and for investments effected on a group basis by certain other entities and their employees, such as pursuant to a payroll deduction plan. The Fund reserves the right to change or waive the minimum initial, and subsequent, investment requirements at any time. 40 Securities dealers and other institutions effecting transactions in Portfolio shares for the accounts of their clients may charge their clients direct fees in connection with such transactions. The Fund and Lazard reserve the right to reject any purchase order. All funds will be invested in full and fractional shares. Stock certificates will not be issued. Shares of each Portfolio may be purchased in exchange for securities which are permissible investments of that Portfolio, subject to the Investment Manager's determination that the securities are acceptable. Securities accepted in exchange for Portfolio shares will be valued at the mean between their bid and asked quotations. In addition, securities accepted in exchange for Portfolio shares are required to be liquid securities that are not restricted as to transfer and have a value that is readily ascertainable (and not established only by valuation procedures), as evidenced by a listing on the American Stock Exchange, the New York Stock Exchange, The NASDAQ Stock Market, a recognized non-U.S. exchange or non-NASDAQ listing with at least two market makers. PURCHASES THROUGH THE TRANSFER AGENT. Orders for Portfolio shares will become effective at the net asset value per share next determined after receipt by the Transfer Agent or other agent of a check drawn on any member of the Federal Reserve System or after receipt by the Custodian or other agent of a bank wire or Federal Reserve Wire. Checks must be payable in United States dollars and will be accepted subject to collection at full face value. By investing in a Portfolio, a shareholder appoints the Transfer Agent, as agent, to establish an open account to which all shares purchased will be credited, together with any dividends and capital gain distributions that are paid in additional shares. PURCHASES THROUGH A LAZARD BROKERAGE ACCOUNT. Shares of all of the Portfolios are sold by Lazard only to customers of Lazard without a sales charge, on a continuous basis at the net asset value of the Portfolio next determined after receipt of a purchase order by Lazard. Payments must be made to Lazard by the settlement date. Because Lazard does not forward investors' funds until the business day on which the order is settled, it may benefit from temporary use of these funds. Please contact your Lazard account representative for specific instructions on how to purchase Portfolio shares through your Lazard brokerage account. AUTHORIZED BROKERS. The Fund has authorized one or more brokers to accept on its behalf purchase and redemption orders. Such brokers are authorized to designate other intermediaries to accept purchase and redemption orders on the Fund's behalf. The Fund will be deemed to have received a purchase or redemption order when an authorized broker or, if applicable, a broker's authorized designee, accepts the order. Customer orders will be priced at the Fund's net asset value next computed after such orders are accepted by an authorized broker or the broker's authorized designee. REDEMPTION FEE. Each Portfolio will impose a redemption fee equal to 1.00% of the net asset value of Fund shares acquired by purchase or exchange on or after July 1, 2001 and redeemed or exchanged within 30 days after such shares were acquired. This fee will be calculated based on the shares' net asset value at redemption and deducted from the redemption proceeds. The fee will be retained by the Portfolio and used primarily to offset the transaction costs that short-term trading imposes on the Portfolio and its remaining shareholders. 41 Shareholders participating in omnibus account arrangements will be charged the fee by their omnibus account provider. For purposes of calculating the 30-day holding period, the Fund will employ the "first in, first out" method, which assumes that the shares redeemed or exchanged are the ones held the longest. No redemption fee will be charged on the redemption or exchange of shares held longer than 30 days or acquired through the reinvestment of dividends or capital gains distributions, and such shares will be redeemed first. The redemption fee may be waived, modified or terminated at any time, or from time to time. REDEMPTION COMMITMENT. The Fund has committed to pay in cash all redemption requests by any shareholder of record, limited in amount during any 90-day period to the lesser of $250,000 or 1% of the value of a Portfolio's net assets at the beginning of such period. Such commitment is irrevocable without the prior approval of the Commission. In the case of requests for redemption in excess of such amount, the Fund's Board reserves the right to make payments, in whole or in part, in portfolio securities (which may include non-marketable securities) or other assets of the Portfolio in cases of emergency or at any time that the Investment Manager believes a cash distribution would impair the liquidity of the Portfolio to the detriment of the existing shareholders. In such event, the securities used to meet the redemption request would be valued in the same manner as the Portfolio's investments are valued. If the recipient sold such securities, brokerage charges might be incurred. SUSPENSION OF REDEMPTIONS. The right of redemption may be suspended, or the date of payment postponed: (a) during any period when the New York Stock Exchange is closed (other than customary weekend and holiday closings); (b) when trading in the markets that the Portfolio ordinarily utilizes is restricted, or when an emergency exists as determined by the Commission so that disposal of the Portfolio's investments or determination of its net asset value is not reasonably practicable; or (c) for such other periods as the Commission, by order, may permit to protect the Portfolio's shareholders. DISTRIBUTION AND SERVICING PLAN (OPEN SHARES ONLY) Open Shares are subject to a Distribution and Servicing Plan adopted pursuant to Rule 12b-1 (the "Rule") adopted by the Commission under the 1940 Act which provides, among other things, that an investment company may bear expenses of distributing its shares only pursuant to a plan adopted in accordance with the Rule. Pursuant to the Distribution and Servicing Plan, the Fund pays Lazard, for advertising, marketing and distributing each Portfolio's Open Shares, and for the provision of certain services to the holders of Open Shares, a fee at the annual rate of .25% of the value of the average daily net assets of the Portfolio's Open Class. Lazard may make payments to certain financial institutions, securities dealers and other industry professionals (collectively, "Service Agents") for providing these services. The services provided may include personal services relating to shareholder accounts, such as answering shareholder inquiries regarding the Fund and providing reports and other information, and services related to the maintenance of shareholder accounts. The fee payable for such services is intended to be a "service fee" as defined in Conduct Rules of the NASD. Under the Distribution and Servicing Plan, Lazard may make payments to third parties in respect of these services. From time to time, Lazard may defer or waive receipt of fees under the Distribution and Servicing Plan while retaining the ability to be paid by the Fund under the Distribution and Servicing Plan thereafter. The fees payable to Lazard under the Distribution and 42 Servicing Plan for advertising, marketing and distributing Open Shares, and for payments to Service Agents, are payable without regard to actual expenses incurred. The Fund's Board determined, in the exercise of its business judgment, that the Fund's Distribution and Servicing Plan is reasonably likely to benefit each Portfolio and holders of Open Shares. A quarterly report of the amounts expended under the Distribution and Servicing Plan, and the purposes for which such expenditures were incurred, must be made to the Board for its review. In addition, the Distribution and Servicing Plan provides that it may not be amended to increase materially the costs which holders of Open Shares of a Portfolio may bear for distribution pursuant to the Distribution and Servicing Plan without such shareholders' approval. It further provides that other material amendments of the Distribution and Servicing Plan must be approved by the Board and by the Board members who are not "interested persons" (as defined in the 1940 Act) of the Fund and have no direct or indirect financial interest in the operation of the Distribution and Servicing Plan or in any agreements entered into in connection with the Distribution and Servicing Plan, by vote cast in person at a meeting called for the purpose of considering such amendments. The Distribution and Servicing Plan is subject to annual approval by such vote cast in person at a meeting called for the purpose of voting on the Distribution and Servicing Plan. As to each Portfolio, the Distribution and Servicing Plan may be terminated at any time by vote of a majority of the Board members who are not "interested persons" and have no direct or indirect financial interest in the operation of the Distribution and Servicing Plan or in any agreements entered into in connection with the Distribution and Servicing Plan, or by vote of the holders of a majority of such Portfolio's Open Shares. For the fiscal year ended December 31, 2000, the operational Portfolios paid the Distributor the amounts set forth below with respect to their Open Shares under the Distribution and Servicing Plan: AMOUNT PAID TO DISTRIBUTOR UNDER DISTRIBUTION AND SERVICING PLAN FOR FISCAL YEAR NAME OF PORTFOLIO ENDED DECEMBER 31, 2000 -------------------------- ----------------------------------- Equity Portfolio $ 226,792 Mid Cap Portfolio $ 19,659 Small Cap Portfolio $ 163,695 Global Equity Portfolio $ 15,067 International Equity Portfolio $ 375,655 International Small Cap Portfolio $ 5,466 Emerging Markets Portfolio $ 22,326 Bond Portfolio $ 26,379 High Yield Portfolio $ 37,671 International Fixed-Income Portfolio $ 28,022 Strategic Yield Portfolio $ 35,411 Mortgage Portfolio N/A 43 DIVIDENDS AND DISTRIBUTIONS The Fund intends to declare as a dividend on the outstanding shares of each of the Bond Portfolio, High Yield Portfolio, International Fixed-Income Portfolio, Strategic Yield Portfolio and Mortgage Portfolio, substantially all of the Portfolio's net investment income at the close of each business day to shareholders of record at 4:00 p.m. (Eastern time). Net investment income for a Saturday, Sunday or holiday will be included in the dividend declared on the previous business day. Dividends declared on the shares of the Bond Portfolio, High Yield Portfolio, International Fixed-Income Portfolio, Strategic Yield Portfolio and Mortgage Portfolio ordinarily will be paid on the last business day of each month. Shareholders who redeem all their shares of any of these Portfolios prior to a dividend payment date will receive, in addition to the redemption proceeds, any dividends that are declared but unpaid through the date of their redemption. Shareholders of any of these Portfolios who redeem only a portion of their shares will receive all dividends declared but unpaid on those shares on the next dividend payment date. Dividends from net investment income on the Equity Portfolio, Mid Cap Portfolio, Small Cap Portfolio, Global Equity Portfolio, International Equity Portfolio, International Small Cap Portfolio, Emerging Markets Portfolio and International Equity Select Portfolio generally will be declared and paid at least annually, and may be declared and paid more frequently. Dividends for each Class of a Portfolio will be calculated at the same time and in the same manner and will be of the same amount, except that certain expenses will be borne exclusively by one Class and not by the other, such as fees payable under the Distribution and Servicing Plan. Open Shares will receive lower per share dividends than Institutional Shares because of the higher expenses borne by Open Shares. Investment income for a Portfolio includes, among other things, interest income, accretion of market and original issue discount and amortization of premium and, in the case of the Equity Portfolio, Mid Cap Portfolio, Small Cap Portfolio, Global Equity Portfolio, International Equity Portfolio, International Small Cap Portfolio and Emerging Markets Portfolio, dividends. With respect to all of the Portfolios, net realized capital gains, if any, will be distributed at least annually, and may be declared and paid more frequently. If a dividend check mailed to a shareholder who elected to receive dividends and/or capital gain distributions in cash is returned as undeliverable by the postal or other delivery service, such shareholder's distribution option automatically will be converted to all dividends and other distributions reinvested in additional shares. NO INTEREST WILL ACCRUE ON AMOUNTS REPRESENTED BY UNCASHED DISTRIBUTION OR REDEMPTION CHECKS. On dividend payable date, each Portfolio forwards to the Fund's custodian the required amount of cash to pay all shareholders who elected to receive dividends in cash. TAXATION Management believes that each Portfolio (other than the International Equity Select Portfolio, which had not commenced operations) has qualified for the fiscal year ended 44 December 31, 2000 as a "regulated investment company" under Subchapter M of the Code. It is intended that each such Portfolio will continue to so qualify as a regulated investment company, if such qualification is in the best interests of its shareholders. Each Portfolio will be treated as a separate entity for tax purposes and thus the provisions of the Code applicable to regulated investment companies generally will be applied to each Portfolio separately, rather than to the Fund as a whole. As a regulated investment company, a Portfolio will pay no Federal income tax on net investment income and net realized securities gains to the extent that such income and gains are distributed to shareholders in accordance with applicable provisions of the Code. To qualify as a regulated investment company, the Portfolio must distribute at least 90% of its net income (consisting of net investment income and net short-term capital gain) to its shareholders and meet certain asset diversification and other requirements. If the Portfolio did not qualify as a regulated investment company, it would be treated, for tax purposes, as an ordinary corporation subject to Federal income tax. The term "regulated investment company" does not imply the supervision of management of investment practices or policies by any government agency. Any dividend or distribution paid shortly after an investor's purchase may have the effect of reducing the net asset value of the shares below the investor's cost of those shares. Such a dividend or distribution would be a return of investment in an economic sense, although taxable as stated in the Prospectus. In addition, the Code provides that if a shareholder holds shares of a Portfolio for six months or less and has received a capital gain distribution with respect to such shares, any loss incurred on the sale of such shares will be treated as long-term capital loss to the extent of the capital gain distribution received. Corporate shareholders of the Equity Portfolio, Mid Cap Portfolio, Small Cap Portfolio and Global Equity Portfolio will be eligible for the dividends-received deduction on the dividends (excluding the net capital gain dividends) paid by the Portfolio, to the extent that the Portfolio's income is derived from certain dividends received from domestic corporations. A corporation's dividends-received deduction will be disallowed unless the corporation holds shares in the Portfolio for 46 days or more during the 90-day period commencing 45 days before the shares become ex-dividend. Furthermore, a corporation's dividends-received deduction will be disallowed to the extent a corporation's investment in shares of the Portfolio is financed with indebtedness. It is anticipated that distributions from Portfolios, other than the Equity Portfolio, Mid Cap Portfolio, Small Cap Portfolio and Global Equity Portfolio, will not qualify for the dividends-received distribution. Each year the Fund will notify shareholders of the federal income tax status of distributions. The Bond Portfolio, High Yield Portfolio and International Fixed-Income Portfolio may invest in Real Estate Mortgage Investment Conduits ("REMICs"). Interests in REMICs are classified as either "regular" interests or "residual" interests. Under the Code, special rules apply with respect to the treatment of a portion of the Portfolio's income from REMIC residual interests. (Such portion is referred to herein as "Excess Inclusion Income.") Excess Inclusion Income generally cannot be offset by net operating losses and, in addition, constitutes unrelated business taxable income to entities which are subject to the unrelated business income tax. The Code provides that a portion of Excess Inclusion Income attributable to REMIC residual interests held by regulated investment companies such as the 45 Portfolios shall, pursuant to regulations, be allocated to the shareholders of such regulated investment company in proportion to the dividends received by such shareholders. Accordingly, shareholders of the Bond Portfolio, High Yield Portfolio and International Fixed-Income Portfolio generally will not be able to use net operating losses to offset such Excess Inclusion Income. In addition, if a shareholder of one of the Portfolios is an entity subject to the unrelated business income tax (including a qualified pension plan, an IRA, a 401(k) plan, a Keogh plan, or another tax-exempt entity) and is allocated any amount of Excess Inclusion Income, such a shareholder may be required to file a return and pay a tax on such Excess Inclusion Income even though a shareholder might not have been required to pay such tax or file such return absent the receipt of such Excess Inclusion Income. The Investment Manager anticipates that only a small portion, if any, of the assets of the Bond Portfolio, High Yield Portfolio and International Fixed-Income Portfolio will be invested in REMIC residual interests. Accordingly, the amount of Excess Inclusion Income, if any, received by the Portfolios and allocated to their shareholders should be quite small. Shareholders that are subject to the unrelated business income tax should consult their own tax adviser regarding the treatment of their income derived from the Portfolios. Except as discussed above with respect to Excess Inclusion Income, a dividend or capital gains distribution with respect to shares held by a tax-deferred or qualified plan, such as an IRA, 403(b)(7) retirement plan or corporate pension or profit sharing plan, will not be taxable to the plan. Distributions from such plans will be taxable to individual participants under applicable tax rules without regard to the income earned by the qualified plan. Ordinarily, gains and losses realized from portfolio transactions will be treated as capital gains and losses. However, all or a portion of the gain or loss realized from the disposition of foreign currency, non-U.S. dollar denominated debt instruments, and certain financial futures and options, may be treated as ordinary income or loss under Section 988 of the Code. In addition, all or a portion of the gain realized from the disposition of certain market discount bonds will be treated as ordinary income under Section 1276 of the Code. Finally, all or a portion of the gain realized from engaging in "conversion transactions" may be treated as ordinary income under Section 1258 of the Code. "Conversion transactions" are defined to include certain forward, futures, option and straddle transactions, transactions marketed or sold to produce capital gains, or transactions described in Treasury regulations to be issued in the future. Under Section 1256 of the Code, gain or loss realized by a Portfolio from certain financial futures and options transactions (other than those taxed under Section 988 of the Code) will be treated as 60% long-term capital gain or loss and 40% short-term capital gain or loss. Gain or loss will arise upon the exercise or lapse of such futures and options, as well as from closing transactions. In addition, any such futures or options remaining unexercised at the end of the Portfolio's taxable year will be treated as sold for their then fair market value, resulting in additional gain or loss to the Portfolio characterized in the manner described above. Offsetting positions held by a Portfolio involving financial futures and options may constitute "straddles." Straddles are defined to include "offsetting positions" in actively traded personal property. The tax treatment of straddles is governed by Sections 1092 and 1258 of the Code, which, in certain circumstances, overrides or modifies the provisions of Sections 46 988 and 1256 of the Code. As such, all or a portion of any short- or long-term capital gain from certain "straddle" transactions may be recharacterized as ordinary income. If a Portfolio were treated as entering into straddles by reason of its futures or options transactions, such straddles could be characterized as "mixed straddles" if the futures or options transactions comprising such straddles were governed by Section 1256 of the Code. The Portfolio may make one or more elections with respect to "mixed straddles." Depending upon which election is made, if any, the results to the Portfolio may differ. If no election is made, to the extent the straddle rules apply to positions established by the Portfolio, losses realized by the Portfolio will be deferred to the extent of unrealized gain in any offsetting positions. Moreover, as a result of the straddle and conversion transaction rules, short-term capital loss on straddle positions may be recharacterized as long-term capital loss, and long-term capital gain may be recharacterized as short-term capital gain or ordinary income. If a Portfolio either (1) holds an appreciated financial position with respect to stock, certain debt obligations, or partnership interests ("appreciated financial position") and then enters into a short sale, futures or forward contract, or offsetting notional principal contract (collectively, a "Contract") with respect to the same or substantially identical property or (2) holds an appreciated financial position that is a Contract and then acquires property that is the same as, or substantially identical to, the underlying property, the Portfolio generally will be taxed as if the appreciated financial position were sold at its fair market value on the date the Portfolio enters into the financial position or acquires the property, respectively. Income received by a Portfolio from sources within foreign countries may be subject to withholding and other taxes imposed by such countries. Tax conventions between certain countries and the United States may reduce or eliminate such taxes. It is impossible to determine the effective rate of foreign tax in advance, since the amount of each Portfolio's assets to be invested in various countries is not known. If more than 50% of the value of a Portfolio's total assets at the close of its taxable year consists of the stock or securities of foreign corporations, the Portfolio may elect to "pass through" to its shareholders the amount of foreign income taxes paid by the Portfolio. Pursuant to such election, shareholders would be required: (i) to include in gross income, even though not actually received, their respective pro rata shares of the foreign taxes paid by the Portfolio; (ii) treat their income from the Portfolio as being from foreign sources to the extent that the Portfolio's income is from foreign sources; and (iii) either to deduct their pro rata share of foreign taxes in computing their taxable income, or to use it as a foreign tax credit against federal income (but not both). No deduction for foreign taxes could be claimed by a shareholder who does not itemize deductions. It is anticipated that each of the International Equity Portfolio, International Equity Select Portfolio, International Fixed-Income Portfolio, International Small Cap Portfolio, Emerging Markets Portfolio and Global Equity Portfolio will be operated so as to meet the requirements of the Code to "pass through" to shareholders of the Portfolio credits for foreign taxes paid, although there can be no assurance that these requirements will be met. Each shareholder will be notified within 45 days after the close of each taxable year of the Portfolio whether the foreign taxes paid by the Portfolio will "pass through" for that year, and, if so, the 47 amount of each shareholder's pro rata share of (i) the foreign taxes paid, and (ii) the Portfolio's gross income from foreign sources. Of course, shareholders who are not liable for federal income taxes, such as retirement plans qualified under Section 401 of the Code, will not be affected by any such "pass through" of foreign tax credits. If a Portfolio invests in an entity that is classified as a "passive foreign investment company" ("PFIC") for Federal income tax purposes, the operation of certain provisions of the Code applying to PFICs could result in the imposition of certain Federal income taxes on the Portfolio. In addition, gain realized from the sale, other disposition or marking-to-market of PFIC securities may be treated as ordinary income under Section 1291 or Section 1296 of the Code. Investment by a Portfolio in securities issued at a discount or providing for deferred interest or for payment of interest in the form of additional obligations could, under special tax rules, affect the amount, timing and character of distributions to shareholders by causing a Portfolio to recognize income prior to the receipt of cash payments. For example, the Portfolio could be required to recognize annually a portion of the discount (or deemed discount) at which such securities were issued and to distribute an amount equal to such income in order to maintain its qualification as a regulated investment company. In such case, the Portfolio may have to dispose of securities which it might otherwise have continued to hold in order to generate cash to satisfy these distribution requirements. PERFORMANCE INFORMATION Current yield is computed pursuant to a formula which operates as follows: The amount of the relevant Portfolio's expenses accrued for the 30-day period (net of reimbursements) is subtracted from the amount of the dividends and interest earned (computed in accordance with the regulatory requirements) by such Portfolio during the period. That result is then divided by the product of: (a) the average daily number of such Portfolio's shares outstanding during the period that were entitled to receive dividends, and (b) the net asset value per share on the last day of the period less any undistributed earned income per share reasonably expected to be declared as a dividend shortly thereafter. The quotient is then added to 1, and that sum is raised to the 6th power, after which 1 is subtracted. The current yield is then arrived at by multiplying the result by 2. The yield for the 30-day period ended December 31, 2000 for Institutional Shares and Open Shares of each Portfolio indicated below was as follows: 48 30-DAY YIELD -------------------------------- INSTITUTIONAL OPEN NAME OF PORTFOLIO SHARES SHARES ------------------ ------------- -------- Bond 6.70% 6.47% High Yield 14.33% 14.01% International Fixed-Income 4.09% 3.78% Strategic Yield 7.02% 6.67% Average annual total return is calculated by determining the ending redeemable value of an investment purchased with a hypothetical $1,000 payment made at the beginning of the period (assuming the reinvestment of dividends and distributions), dividing by the amount of the initial investment, taking the "n" the root of the quotient (where "n" is the number of years in the period) and subtracting 1 from the result. The average annual total return of Institutional Shares and Open Shares for the indicated Portfolio and periods ended December 31, 2000 (the date listed in the footnote is the beginning of the period for the indicated Portfolio) was as follows:
AVERAGE ANNUAL TOTAL RETURNS INSTITUTIONAL SHARES FOR PERIODS ENDED DECEMBER 31, 2000 ----------------------------------- ---------------------------------------------------------------------------------- NAME OF PORTFOLIO 1-YEAR 5-YEARS 10-YEARS SINCE INCEPTION Equity (2.64)% 12.30% 15.10% 12.76%(1) Mid Cap 22.44% N/A N/A 10.26%(2) Small Cap 15.89% 10.34% N/A 14.43%(3) Global Equity (9.51)% N/A N/A 10.50%(4) International Equity (10.55)% 10.74% N/A 9.95%(5) International Small Cap (4.44)% 8.48% N/A 6.74%(6) Emerging Markets (29.53)% (1.31)% N/A (2.15)%(7) Bond 7.53% 5.11% N/A 5.97%(8) High Yield (15.19)% N/A N/A (3.51)%(9) International Fixed-Income (4.70)% 0.85% N/A 5.20%(10) Strategic Yield 1.12% 5.06% N/A 6.41%(11)
-------------- (1) June 1, 1987. (2) November 4, 1997. (3) October 30, 1991. (4) January 4, 1996. (5) October 29, 1991. (6) December 1, 1993. (7) July 15, 1994. (8) November 12, 1991. (9) January 2, 1998. (10) November 8, 1991. (11) October 1, 1991. 49 AVERAGE ANNUAL TOTAL RETURNS OPEN SHARES FOR PERIODS ENDED DECEMBER 31, 2000 ------------------ ----------------------------------------------------------- NAME OF PORTFOLIO 1-YEAR SINCE INCEPTION Equity (2.91)% 9.07%(1) Mid Cap 22.00% 9.89%(2) Small Cap 15.60% 6.58%(3) Global Equity (9.72)% 9.52%(3) International Equity (10.95)% 9.99%(4) International Small Cap (4.85)% 5.69%(5) Emerging Markets (29.80)% (7.42)%(6) Bond 7.25% 4.95%(7) High Yield (15.54)% (5.62)%(8) International Fixed-Income (4.92)% (0.27)%(6) Strategic Yield 0.71% 2.33%(4) ---------- (1) February 5, 1997. (2) November 4, 1997. (3) January 30, 1997. (4) January 23, 1997. (5) February 13, 1997. (6) January 8, 1997. (7) March 5, 1997. (8) February 24, 1998. Total return is calculated by subtracting the amount of the relevant Portfolio's net asset value per share at the beginning of a stated period from the net asset value per share at the end of the period (after giving effect to the reinvestment of dividends and distributions during the period), and dividing the result by the net asset value per share at the beginning of the period. The total return of Institutional Shares and Open Shares for the indicated Portfolio from inception through December 31, 2000 (the date listed in the footnote is the date operations commenced or, with respect to Open Shares, the initial public offering date for the indicated Portfolio) was as follows: 50 TOTAL RETURN THROUGH DECEMBER 31, 2000 ------------------------------------ NAME OF PORTFOLIO INSTITUTIONAL SHARES OPEN SHARES ----------------- -------------------- ----------- Equity 411.36%(1) 40.32%(12) Mid Cap 36.12%(2) 34.72%(2) Small Cap 244.07%(3) 28.37%(13) Global Equity 64.62%(4) 42.85%(13) International Equity 138.54%(5) 45.50%(14) International Small Cap 58.78%(6) 23.93%(15) Emerging Markets (13.11)%(7) (26.42)%(16) Bond 70.25%(8) 20.31%(17) High Yield (10.16)%(9) (15.22)%(18) International Fixed-Income 59.18%(10) (1.08)%(16) Strategic Yield 77.61%(11) 9.51%(14) (1) June 1, 1987. (2) November 4, 1997. (3) October 30, 1991. (4) January 4, 1996. (5) October 29, 1991. (6) December 1, 1993. (7) July 15, 1994. (8) November 12, 1991. (9) January 2, 1998. (10) November 8, 1991. (11) October 1, 1991. (12) February 5, 1997. (13) January 30, 1997. (14) January 23, 1997. (15) February 13, 1997. (16) January 8, 1997. (17) March 5, 1997. (18) February 24, 1998. A Portfolio's yield and total return are not fixed and will fluctuate in response to prevailing market conditions or as a function of the type and quality of the securities held by such Portfolio, its average portfolio maturity and its expenses. Yield and total return information is useful in reviewing a Portfolio's performance and such information may provide a basis for comparison with other investments but such information may not provide a basis for comparison with certificates of deposit, which pay a fixed rate of return, or money market funds, which seek a stable net asset value. Investment return and principal value of an investment in a Portfolio will fluctuate so that an investor's shares, when redeemed, may be worth more or less than their original cost. Performance of each Class will be calculated separately and will take into account any applicable distribution and service fees. As a result, at any given time, the performance of Open Shares should be expect to be lower than that of Institutional Shares. From time to time, the Fund may compare a Portfolio's performance against one or more broad-based indices or data from Lipper Analytical Services, Inc., Money Magazine, 51 Morningstar, Inc. and other industry publications. In addition, the Fund may compare a Portfolio's performance against inflation with the performance of other instruments against inflation, such as short-term Treasury Bills (which are direct obligations of the U.S. Government) and FDIC-insured bank money market accounts. Investors in the Mortgage Portfolio may obtain more current information about the Portfolio, such as yield and portfolio composition, by contacting the Fund at the address or telephone number given on the first page of this Statement of Additional Information. INFORMATION ABOUT THE FUND AND PORTFOLIOS As of April 6, 2001, the following shareholders owned beneficially or of record 5% or more of the indicated Portfolio's outstanding shares: PERCENTAGE OF TOTAL NAME AND ADDRESS TIONAL SHARES OUTSTANDING EQUITY PORTFOLIO Smith Barney Inc. 29.98% 388 Greenwich Street New York, NY 10013-2339 MID CAP PORTFOLIO Merrill Lynch for the Sole 13.07% Benefit of Its Customers Attn: Fund Admin. LZSYX 4800 Deer Lake Dr. East, 2nd Floor Jacksonville, FL 32246-6486 Lazard Freres & Co. LLC 12.06% Lazard Freres & Co. LLC Employees 30 Rockefeller Plaza, 60th Floor New York, NY 10112-0002 Lazard Freres & Co. 10.39% 30 Rockefeller Plaza, 60th Floor New York, NY 10112-0002 Lazard Freres & Co. LLC 8.13% Bathurst Investments Limited 30 Rockefeller Plaza, 60th Floor New York, NY 10020 52 SMALL CAP PORTFOLIO Merrill Lynch For the Sole 10.61% Benefit of Its Customers Attn: Fund Admin. LZSCX 4800 Deer Lake Dr. East, 2nd Floor Jacksonville, FL 32246-6484 Northern Trust Trustee 9.93% FBO ITT Industries Master Retirement Trust #22-51598 P.O. Box 92956 Chicago, IL 60675-2956 Lazard Freres & Co. LLC 6.27% National Automatic Sprinkler Industry Small Cap Pension Fund Board of Trustees c/o Michael Jacobson 8000 Corporate Drive Landover, MD 20785-2239 GLOBAL EQUITY PORTFOLIO Blue Cross Blue Shield of Massachusetts Inc. 57.97% Massachusetts Inc. Managed Care Attn: Treasury 01/07 401 Park Drive Boston, MA 02215-3325 Blue Cross Blue Shield of Massachusetts Inc. Indemnity 32.09% Attn: Treasury 01/07 401 Park Drive Boston, MA 02215-3325 Lazard Freres & Co. LLC 5.61% The Baycrest Centre Foundation Helaine Maisels Admin. Assistance Finance Dept. 3560 Bathurst Street North York, Ontario 53 INTERNATIONAL EQUITY PORTFOLIO Lazard Freres & Co. LLC 8.93% Mercantile Safe Deposit & Trust Co. Cust. Bakery & Confectionery Intl. Equity 30 Rockefeller Plaza, New York, NY 10112 INTERNATIONAL SMALL CAP PORTFOLIO Lazard Asset Management as Agent 10.31% Oregon Investment Council 30 Rockefeller Plaza New York, NY 10112-0002 Lazard Freres & Co. LLC 8.48% United Air Lines Inc. Pension and Welfare Plans 30 Rockefeller Plaza, 60th Floor New York, NY 10112 Northern Trust Custodian 6.36% FBO Public School Teachers Pension Fund of Chicago P.O. Box 92956 Chicago, IL 60675 EMERGING MARKETS PORTFOLIO Lazard Asset Management As Agent 9.29% Oregon Investment Council 30 Rockefeller Plaza New York, NY 10122-0002 Wilmington Trust Company, Custodian 8.35% FBO Pricewaterhouse Coopers LLP Employee and Partners Savings c/o Mutual Funds P.O. Box 8971 Wilmington, DE 19899-8971 54 Lockheed Martin Corporation 7.04% Master Retirement Trust Attn: David C. Toth Lockheed Martin Investment Management Co. 6750 Rockledge Drive, Suite 550 Bethesda, MD 20817 Lazard Freres & Co. LLC 6.44% University of British Columbia Faculty Pension Plan Stanley Hamilton/Dir. Ops 235-2075 Westbrook Mall Vancouver, BC BOND PORTFOLIO Lazard Freres & Co. LLC 14.46% Elaine Louise David-Weill c/o Ken Colton Lazard Freres & Co. LLC 30 Rockefeller Plaza New York, NY 10112-0002 Lazard Freres & Co. LLC 6.86% Employees Pension Trust Attn: Lorena Guagenti 30 Rockefeller Plaza New York, NY 10112-0002 HIGH YIELD PORTFOLIO MAC & CO 69.38% Mutual Funds Operations P.O. Box 3198 Pittsburgh, PA 15320-3198 Lazard Freres & Co. LLC 8.78% Employee Security Fund 30 Rockefeller Plaza, 60th Floor New York, NY 10112-0002 55 INTERNATIONAL FIXED-INCOME PORTFOLIO Lazard Freres & Co. LLC 59.56% Graphic Communications Intl. Union Supplemental Retirement and Disability Fund-Fixed Income A/C Attn: Mr. G. L. Griesbauer Jr. 1900 L Street NW Washington, D.C. 20036-5002 Smith Barney Inc. 19.71% 388 Greenwich Street New York, NY 10013-2339 Prudential Securities Inc. 11.89% Special Custody Account for the Exclusive Benefit of Customers-PC Attn: Mutual Funds One New York Plaza New York, NY 10004-1901 STRATEGIC YIELD PORTFOLIO Wells Fargo Bank Minnesota NA 36.56% TTEE FBO Navistar P.O. Box 1533 Minneapolis, MN 55480-1533 Lazard Freres & Co. LLC 27.56% Mack Trucking Inc. Retirement Trust-Strategic Yield Attn: Mark Cherry 2100 Mack Blvd. Allentown, PA 18103-5622 MAC & CO A/C 076-050 5.49% Mutual Funds Operations P.O. Box 3198 Pittsburgh, PA 15230-3198 56 MORTGAGE PORTFOLIO The City of Stamford Firefighters 98.50% Pension Fund 888 Washington Boulevard Stamford, CT 06901-2902 CENTAGE OF TOTAL NAME AND ADDRESS SHARES OUTSTANDING ---------------- EQUITY PORTFOLIO Connecticut General Life Ins. Co. 66.32% One Commercial Plaza 280 Trumbull Street Attn: Liz Pezda H-19-B P.O. Box 2975 Hartford, CT 06104-2975 Smith Barney 401K Advisor GR TR 16.32% Smith Barney Corporate Trust Co. DTD 01/01/1998 Plan Val Scvcs 2 Tower Center P.O. Box 1063 East Brunswick, NJ 08816-1063 MID CAP PORTFOLIO Connecticut General Life Ins. Co. 64.95% One Commercial Plaza 280 Trumbull Street Attn: Liz Pezda H-19-B P.O. Box 2975 Hartford, CT 06104-2975 First Tennessee Bank NA 19.04% 165 Madison Avenue Memphis, TN 38103-2723 SMALL CAP PORTFOLIO Connecticut General Life Ins. Co. 55.19% One Commercial Plaza 280 Trumbull Street Attn.: Liz Pezda H-19-B P.O. Box 2975 Hartford, CT 06104-2975 57 Smith Barney 410K Advisor GR TR 13.17% Smith Barney Corporate Trust Co. DTD 01/01/1998 Plan Val Scvcs 2 Tower Center P.O. Box 1063 East Brunswick, NJ 08816-1063 Nationwide Life Insurance QVPA 7.07% c/o IPO Port Acct. P.O. Box 182029 Columbus, OH 43218-2029 GLOBAL EQUITY PORTFOLIO Pershing Keen Nominees Limited 47.59% Capstan House One Clove Crescent East India Dock, London E14 2BH Lazard Freres & Co. LLC 8.01% Jessica Bourgeois 229 Berkeley Place Brooklyn, NY 11217-3801 Trifid Securities Ltd. A/C GW 6.96% P.O. Box 108 2-6 Church Street St. Helier Jersey JE4 8QD Channel Islands Lazard Freres and Co. LLC 6.31% FFHS&J Profit Sharing Plan FBO Stanley Katz Attn: Gary Spagnoli One New York Plaza New York, NY 10004-1901 Auckland Trust Company Ltd. 5.73% Level 6 128 Broadway New Market P.O. Box 1822 Auckland, New Zealand 58 INTERNATIONAL EQUITY PORTFOLIO Connecticut General Life Insurance Co. 33.61% One Commercial Plaza 280 Trumbull Street Attn: Liz Pezda H-19-B P.O. Box 2975 Hartford, CT 06104-2975 Merrill Lynch for the Sole 9.62% Benefit of its Customers Attn: Fund Admin. LZSYX 4800 Deer Lake Dr. East, 2nd Fl Jacksonville, FL 32246-6486 Smith Barney 401K Advisor GR TR 5.19% Smith Barney Corporate Trust Co. DTD 01/01/1998 Pl. Val Scvcs 2 Tower Center P.O. Box 1063 East Brunswick, NJ 08816-1063 INTERNATIONAL SMALL CAP PORTFOLIO Thomas J. Kohout Trustee 32.95% Thomas J. Kohout Trustee Rev. Trust U/A 12/16/77 Restated 10/09/98 1910 East Bay Tree Circle Lakeside Val Vista Estates Gilbert, AZ 85234-4938 Lazard Freres & Co. LLC 18.38% Dr. Sidney Harman 1987 Revocable TR U/A/D 10/17/94 Sidney Harman TTEE Dressler & Associate Inc. 10390 Santa Monica Blvd. 360 Los Angeles, CA 90025-5091 Lazard Freres & Co. LLC 8.25% Bitterroot Enterprises Inc. Attn: Joseph L. Fey P.O. Box 7048 Wilmington, DE 19803-0048 59 Bear, Stearns Securities Corp. 6.88% FBO 614-86172-17 1 Metrotech Center North Brooklyn, NY 11201-3870 EMERGING MARKETS PORTFOLIO Charles Schwab & Co. Inc. 36.89% Special Custody Account for Benefit of Customers Attn: Mutual Fund 101 Montgomery Street San Francisco, CA 94104 BNY Clearing Services LLC 9.26% Wendel & Co. 314491 111 East Kilbourn Avenue Milwaukee, WI 53202-6633 Aetna Trust Co. Custodian 6.29% FBO Valuation Unit TN41 UA DTD 7/5/2000 151 Farmington Avenue Hartford, CT 06156-0001 Lazard Freres & Co. LLC 5.80% Cambridge International LLC c/o Theodore H. Northrup 7109 Thorntree Hill Drive Fayetteville, NY 13066-9790 FFB Registration 5.02% 6301 N. Western Avenue, Suite 210 Oklahoma City, OK 73118-1062 BOND PORTFOLIO United Bible Society Pension 7.19% First Union National Bank TTEE DTD 3/5/98 Acct. 2541530055 1525 W. WT Harris Blvd. #1151 Charlotte, NC 28262-8522 Lazard Freres & Co. LLC 6.34% Carol Ann Merritt 29 Goodwood Road Sag Harbor, NY 11963-1241 60 Lazard Freres & Co. LLC 5.20% Camp Vacamas Inc. Attn: Michael Friedman Executive Director 256 Macopin Road West Milford, NJ 07480-3718 Lazard Freres & Co. LLC 5.06% Robert M. Vorsanger IRA Rollover Delaware Charter Trustee 10 Denman Court Short Hills, NJ 07078-1522 HIGH YIELD PORTFOLIO Dingle & Co. 80.24% c/o Comerica Bank Mutual Funds/MC 3446 P.O. Box 75000 Detroit, MI 48275-0001 Lazard Freres & Co. LLC 7.96% Vermont Yankee Nuclear Power 30 Rockefeller Plaza, 60th Floor New York, NY 10112-0002 INTERNATIONAL FIXED-INCOME PORTFOLIO CIBC World Markets Corp. 88.87% FBO 033-51492-17 P.O. Box 3484 Church Street Station New York, NY 10008-3484 Smith Barney 401 K Advisor GR TR 9.14% Smith Barney Corporate Trust Co. DTD 01/01/1998 Plan Val Scvcs 2 Tower Center P.O. Box 1063 East Brunswick, NJ 08816-1063 61 STRATEGIC YIELD PORTFOLIO Lazard Freres & Co. LLC 9.23% North Ottawa Community Hospital Funded Depreciation Account Attn: Jim Davidson 1309 Sheldon Road Grand Haven, MI 49417-2404 Wilmington Trust Co. CO-TTEE 8.96% For Christian M. Andrea-Lam A/C 10893-5 P.O. Box 8882 Wilmington, DE 19899-8882 Lazard Freres & Co. LLC 8.39% North Ottawa Community Hospital Retirement Income Plan 1309 Sheldon Road Grand Haven, MI 49417-2404 A shareholder who beneficially owns, directly or indirectly, more than 25% of the Fund's voting securities may be deemed a "control person" (as defined in the 1940 Act) of the Fund. Certain of the shareholders are investment management clients of the Investment Manager that have entered into agreements with the Investment Manager pursuant to which the Investment Manager has investment discretion and voting power over any assets held in the clients' accounts, including shares of the Portfolios. For purposes of the list above, the Fund considers the Investment Manager to be a beneficial owner of Portfolio shares held in management accounts on behalf of its investment management clients. Generally, all shares have equal voting rights and will be voted in the aggregate, and not by class, except where voting by Class is required by law or where the matter involved affects only one Class. As used in this Statement of Additional Information, the vote of a majority of the outstanding voting securities means, with respect to the Fund or a Portfolio, the vote of the lesser of (i) 67% of the shares represented at a meeting if the holders of more than 50% of the outstanding shares of the Fund or Portfolio, as the case may be, are present in person or by proxy, or (ii) more than 50% of the outstanding shares of the Fund or Portfolio, as the case may be. Shareholders are entitled to one vote for each full share held, and fractional votes for fractional shares held. Each share of the applicable Class of a Portfolio is entitled to such dividends and distributions out of the income earned on the assets belonging to that Portfolio as are declared in the discretion of the Fund's Board of Directors. In the event of the liquidation of a Portfolio, 62 shares of each Class of the Portfolio are entitled to receive the assets attributable to such Class of that Portfolio that are available for distribution based upon the relative net assets of the applicable Class. Shareholders are not entitled to any preemptive rights. All shares, when issued, will be fully paid and non-assessable by the Fund. COUNSEL AND INDEPENDENT AUDITORS Legal matters in connection with the issuance of the shares of the Fund offered hereby will be passed upon by Stroock & Stroock & Lavan LLP, 180 Maiden Lane, New York, New York 10038-4982. Anchin, Block & Anchin LLP, 1375 Broadway, New York, New York 10018, are the independent auditors for the Fund. ADDITIONAL INFORMATION The Fund's Registration Statement, including the Prospectus, the Statement of Additional Information and the exhibits filed therewith, may be examined at the office of the Commission in Washington, D.C. Statements contained in the Prospectus or this Statement of Additional Information as to the content of any contract or other document referred to herein or in the Prospectus are not necessarily complete, and, in each instance, reference is made to the copy of such contract or other document filed as an exhibit to the Registration Statement, each such statement being qualified in all respects by such reference. A special service is available to banks, brokers, investment advisers, trust companies and others who have a number of accounts in the Fund. In addition to the regular Statement of Account furnished to the registered holder after each transaction, a monthly summary of accounts can be provided. The monthly summary will show for each account the account number, the month-end share balance and the dividends and distributions paid during the month. For information on the special monthly summary of accounts, contact the Fund. 63 APPENDIX Rating Categories Description of certain ratings assigned by S&P and Moody's: S&P LONG-TERM AAA An obligation rated 'AAA' has the highest rating assigned by S&P. The obligor's capacity to meet its financial commitment on the obligation is extremely strong. AA An obligation rated 'AA' differs from the highest rated obligations only in small degree. The obligor's capacity to meet its financial commitment on the obligation is very strong. A An obligation rated 'A' is somewhat more susceptible to the adverse effects of changes in circumstances and economic conditions than obligations in higher rated categories. However, the obligor's capacity to meet its financial commitment on the obligation is still strong. BBB An obligation rated 'BBB' exhibits adequate protection parameters. However, adverse economic conditions or changing circumstances are more likely to lead to a weakened capacity of the obligor to meet its financial commitment on the obligation. BB, B, CCC, CC, AND C Obligations rated 'BB', 'B', 'CCC', 'CC', and 'C' are regarded as having significant speculative characteristics. 'BB' indicates the least degree of speculation and 'C' the highest. While such obligations will likely have some quality and protective characteristics, these may be outweighed by large uncertainties or major exposures to adverse conditions. BB An obligation rated 'BB' is less vulnerable to nonpayment than other speculative issues. However, it faces major ongoing uncertainties or exposure to adverse business, financial, or economic conditions which could lead to the obligor's inadequate capacity to meet its financial commitment on the obligation. B An obligation rated 'B' is more vulnerable to nonpayment than obligations rated 'BB', but the obligor currently has the capacity to meet its financial commitment on the obligation. Adverse business, financial, or economic conditions will likely impair the obligor's capacity or willingness to meet its financial commitment on the obligation. CCC An obligation rated 'CCC' is currently vulnerable to nonpayment, and is dependent upon favorable business, financial, 64 and economic conditions for the obligor to meet its financial commitment on the obligation. In the event of adverse business, financial, or economic conditions, the obligor is not likely to have the capacity to meet its financial commitment on the obligation. CC An obligation rated 'CC' is currently highly vulnerable to nonpayment. C A subordinated debt or preferred stock obligation rated 'C' is currently highly vulnerable to nonpayment. The 'C' rating may be used to cover a situation where a bankruptcy petition has been filed or similar action taken, but payments on this obligation are being continued. A 'C' also will be assigned to a preferred stock issue in arrears on dividends or sinking fund payments, but that is currently paying. D An obligation rated 'D' is in payment default. The 'D' rating category is used when payments on an obligation are not made on the date due even if the applicable grace period has not expired, unless S&P believes that such payments will be made during such grace period. The 'D' rating also will be used upon the filing of a bankruptcy petition or the taking of a similar action if payments on an obligation are jeopardized. R The symbol 'r' is attached to the ratings of instruments with significant noncredit risks. It highlights risks to principal or volatility of expected returns which are not addressed in the credit rating. Examples include: obligations linked or indexed to equities, currencies, or commodities; obligations exposed to severe prepayment risk--such as interest-only or principal-only mortgage securities; and obligations with unusually risky interest terms, such as inverse floaters. N.R. The designation 'N.R.' indicates that no rating has been requested, that there is insufficient information on which to base a rating, or that S&P does not rate a particular obligation as a matter of policy. Note: The ratings from 'AA' to 'CCC' may be modified by the addition of a plus (+) or minus (-) sign designation to show relative standing within the major rating categories. SHORT-TERM A-1 A short-term obligation rated 'A-1' is rated in the highest category by S&P. The obligor's capacity to meet its financial commitment on the obligation is strong. Within this category, certain obligations are given a plus sign (+) designation. This indicates that the obligor's capacity to meet its financial commitment on these obligations is extremely strong. A-2 A short-term obligation rated 'A-2' is somewhat more susceptible to the adverse effects of changes in circumstances and economic conditions than obligations in higher rating categories. 65 However, the obligor's capacity to meet its financial commitment on the obligation is satisfactory. A-3 A short-term obligation rated 'A-3' exhibits adequate protection parameters. However, adverse economic conditions or changing circumstances are more likely to lead to a weakened capacity of the obligor to meet its financial commitment on the obligation. B A short-term obligation rated 'B' is regarded as having significant speculative characteristics. The obligor currently has the capacity to meet its financial commitment on the obligation; however, it faces major ongoing uncertainties which could lead to the obligor's inadequate capacity to meet is financial commitment on the obligation. C A short-term obligation rated 'C' is currently vulnerable to nonpayment and is dependent upon favorable business, financial, and economic conditions for the obligor to meet its financial commitment on the obligation. D A short-term obligation rated 'D' is in payment default. The 'D' rating category is used when payments on an obligation are not made on the date due even if the applicable grace period has not expired, unless S&P believes that such payments will be made during such grace period. The 'D' rating also will be used upon the filing of a bankruptcy petition or the taking of a similar action if payments on an obligation are jeopardized. MOODY'S LONG-TERM AAA Bonds rated 'Aaa' are judged to be of the best quality. They carry the smallest degree of investment risk and are generally referred to as "gilt edged." Interest payments are protected by a large or by an exceptionally stable margin and principal is secure. While the various protective elements are likely to change, such changes as can be visualized are most unlikely to impair the fundamentally strong position of such issues. AA Bonds rated 'Aa' are judged to be of high quality by all standards. Together with the 'Aaa' group they comprise what are generally known as high-grade bonds. They are rated lower than the best bonds because margins of protection may not be as large as in 'Aaa' securities or fluctuation of protective elements may be of greater amplitude or there may be other elements present which make the long-term risk appear somewhat larger than the 'Aaa' securities. A Bonds rated 'A' possess many favorable investment attributes and are to be considered as upper-medium-grade obligations. Factors giving security to principal and interest are considered 66 adequate, but elements may be present which suggest a susceptibility to impairment some time in the future. BAA Bonds rated 'Baa' are considered as medium-grade obligations (i.e., they are neither highly protected nor poorly secured). Interest payments and principal security appear adequate for the present but certain protective elements may be lacking or may be characteristically unreliable over any great length of time. Such bonds lack outstanding investment characteristics and in fact have speculative characteristics as well. BA Bonds rated 'Ba' are judged to have speculative elements; their future cannot be considered as well-assured. Often the protection of interest and principal payments may be very moderate, and thereby not well safeguarded during both good and bad times over the future. Uncertainty of position characterizes bonds in this class. B Bonds rated 'B' generally lack characteristics of the desirable investment. Assurance of interest and principal payments or of maintenance of other terms of the contract over any long period of time may be small. CAA Bonds rated 'Caa' are of poor standing. Such issues may be in default or there may be present elements of danger with respect to principal or interest. CA Bonds rated 'Ca' represent obligations which are speculative in a high degree. Such issues are often in default or have other marked shortcomings. C Bonds rated 'C' are the lowest rated class of bonds, and issues so rated can be regarded as having extremely poor prospects of ever attaining any real investment standing. Note: Moody's applies numerical modifiers 1, 2, and 3 in each generic rating classification from 'Aa' through 'Caa'. The modifier 1 indicates that the obligation ranks in the higher end of its generic rating category; the modifier 2 indicates a mid-range ranking; and the modifier 3 indicates a ranking in the lower end of that generic rating category. PRIME RATING SYSTEM (SHORT-TERM) Issuers rated PRIME-1 (or supporting institutions) have a superior ability for repayment of senior short-term debt obligations. Prime-1 repayment ability will often be evidenced by many of the following characteristics: Leading market positions in well-established industries. High rates of return on funds employed. 67 Conservative capitalization structure with moderate reliance on debt and ample asset protection. Broad margins in earnings coverage of fixed financial charges and high internal cash generation. Well-established access to a range of financial markets and assured sources of alternate liquidity. Issuers rated PRIME-2 (or supporting institutions) have a strong ability for repayment of senior short-term debt obligations. This will normally be evidenced by many of the characteristics cited above but to a lesser degree. Earnings trends and coverage ratios, while sound, may be more subject to variation. Capitalization characteristics, while still appropriate, may be more affected by external conditions. Ample alternate liquidity is maintained. Issuers rated PRIME-3 (or supporting institutions) have an acceptable ability for repayment of senior short-term obligations. The effect of industry characteristics and market compositions may be more pronounced. Variability in earnings and profitability may result in changes in the level of debt protection measurements and may require relatively high financial leverage. Adequate alternate liquidity is maintained. Issuers rated Not Prime do not fall within any of the Prime rating categories. 68 LAZARD FUNDS ANNUAL REPORT DECEMBER 31, 2000 ================================================================================ THE LAZARD FUNDS, INC. -------------------------------------------------------------------------------- BOARD OF DIRECTORS ------------------ JOHN J. BURKE RETIRED; FORMER VICE CHAIRMAN AND DIRECTOR, MONTANA POWER COMPANY KENNETH S. DAVIDSON PRESIDENT, DAVIDSON CAPITAL MANAGEMENT CORPORATION NORMAN EIG VICE CHAIRMAN AND MANAGING DIRECTOR, LAZARD FRERES & CO. LLC CARL FRISCHLING SENIOR PARTNER, KRAMER, LEVIN, NAFTALIS & FRANKEL LLP HERBERT W. GULLQUIST VICE CHAIRMAN AND MANAGING DIRECTOR, LAZARD FRERES & CO. LLC; CHIEF INVESTMENT OFFICER, LAZARD ASSET MANAGEMENT WILLIAM KATZ PRESIDENT AND CHIEF OPERATING OFFICER, BBDO WORLDWIDE NETWORK LESTER Z. LIEBERMAN PRIVATE INVESTOR RICHARD REISS, JR. MANAGING PARTNER, GEORGICA ADVISORS LLC JOHN RUTLEDGE PRESIDENT, RUTLEDGE & COMPANY OFFICERS -------- NORMAN EIG CHAIRMAN OF THE BOARD HERBERT W. GULLQUIST PRESIDENT DAVID M. GOLDENBERG VICE PRESIDENT AND SECRETARY BERNARD J. GRZELAK TREASURER ================================================================================ THE LAZARD FUNDS, INC. -------------------------------------------------------------------------------- TABLE OF CONTENTS PAGE Investment Overview ........................................................ 2 Growth Charts .............................................................. 9 Performance Tables ......................................................... 15 Portfolios of Investments Lazard Equity Portfolio .................................................. 18 Lazard Mid Cap Portfolio ................................................. 20 Lazard Small Cap Portfolio ............................................... 22 Lazard Global Equity Portfolio ........................................... 25 Lazard International Equity Portfolio .................................... 27 Lazard International Small Cap Portfolio ................................. 29 Lazard Emerging Markets Portfolio ........................................ 31 Lazard Bond Portfolio .................................................... 33 Lazard High Yield Portfolio .............................................. 37 Lazard International Fixed-Income Portfolio .............................. 41 Lazard Strategic Yield Portfolio ......................................... 52 Lazard Mortgage Portfolio ................................................ 66 Notes to Portfolios of Investments ......................................... 67 Statements of Assets and Liabilities ................................................... 72 Operations ............................................................... 74 Changes in Net Assets .................................................... 76 Financial Highlights ....................................................... 82 Notes to Financial Highlights .............................................. 94 Notes to Financial Statements .............................................. 95 Report of Independent Auditors ............................................. 101 Tax Information (unaudited) ................................................ 102 ================================================================================ THE LAZARD FUNDS, INC. INVESTMENT OVERVIEW -------------------------------------------------------------------------------- The year 2000 will be remembered as the beginning of the slowdown of one of the longest economic expansions in U.S. history. The economy's resilience was tested by six interest rate increases between June 1999 and May 2000 by the Federal Reserve and a sharp rise in energy prices. Those factors, as well as a very strong dollar, had a negative impact on corporate profits and ultimately impacted consumer confidence. By late in the year, the pressures of the economic slowdown were felt across the economy, but most significantly in the higher valuation technology sector. The initial losers in the technology sector were the vastly overvalued "dot-coms" that began their implosion in March. The protracted election did little to help matters and, by year-end, even technology bell-weathers such as Microsoft, Intel and Compaq were warning that financial results would not live up to expectations as demand for personal computers slowed. It was the first year in over a decade that all three major indices (The Dow Jones Industrial Average(Reg. TM), the Standard & Poors (S&P) 500(Reg. TM) and the NASDAQ) finished the year in negative territory. The technology laden NASDAQ Index was down 32.7% for the fourth quarter and 39.3% for the year, reversing most of its gain from 1999 and making it the worst performing year since its inception in 1972. The broader markets, as measured by the S&P 500, suffered as well, giving up 7.8% for the fourth quarter and 9.1% for the year. International stocks, measured by the Morgan Stanley Capital International (MSCI(Reg. TM)) Europe, Australasia and Far East (EAFE(Reg. TM)) Index, were off 2.7% in the fourth quarter, and finished down 14.2% for the year. However, not all the news was bad. Investments in some of the blue chip sectors that were spurned in the past few years, such as drug companies, food and beverages and energy, fared well. In addition, traditional small and mid-sized U.S. companies rebounded from a difficult 1999, and the bond market posted positive returns as it provided a safe haven from the volatility of the equity markets. The divergence between growth and value styles was dramatic in 2000. Value outperformed growth across all sectors and, in some cases, unwound the performance differential from 1999. The volatility of 2000 illustrates the importance of our investment style: choosing high-quality, financially productive companies with reasonable valuations. It was the traditional companies, as well as the less speculative, more financially productive stocks that triumphed in the end as fundamentals again became relevant. As a result, by year-end it was the long-ignored financial sector companies, consumer staples, healthcare and producer manufacturing names within the Portfolios that rose dramatically. Despite the Portfolios having a lower allocation to technology and telecommunications than did the relevant indices, our investments in these sectors had the greatest drag on returns. Our telecommunications holdings were impacted by competitive pressures, which eroded the profitability of the older, capital intensive and fixed-cost companies. We believe that our holdings in technology will be the winners in this group over time, despite near-term volatility. Many of the technology companies have been sold off in the weakened economic environment, but all of the companies in our Portfolios are market leaders with strong cash flow and attractive relative valuations. This past year marked the first time in 10 years that bonds outperformed stocks. Evidence of an economic slowdown and the weak equity environment made bonds look like a particularly attractive haven. However, within bond sectors, volatility was very high. Corporate bonds with weak earnings were impacted as severely as their equity counterparts. Municipal bonds did very well for the year as new supply was low and demand remained high. Going forward, investors should expect a favorable bond environment as economic weakness both in the U.S. and abroad forces central banks to lower interest rates. For investors who got caught up in last year's new economy hype and had large positions in speculative companies, the year 2000 was devastating. The shift to a more rational investment environment based on company fundamentals, rather than the momentum that led the markets in 1999, is healthy. We believe that the Portfolios will benefit from investments in traditional companies that are industry leaders and well-positioned technology companies. The real winners in this marketplace should be old and new economy companies that use technology to increase productivity and profitability. We believe that our sharpened focus on analyzing company fundamentals will enable us to grow and preserve your assets over time. The year 2001 will be a 2 ================================================================================ THE LAZARD FUNDS, INC. INVESTMENT OVERVIEW (CONTINUED) -------------------------------------------------------------------------------- year of transition away from the unrealistic expectations built over the past few years. Investors should expect more normalized returns from the capital markets; returns more in line with history than hype. LAZARD EQUITY PORTFOLIO Lazard Equity Portfolio Institutional Shares posted a total return of (2.64)%, while Open Shares posted a total return of (2.91)%, beating the (9.11)% return of the S&P 500 Index. Our sizable allocations to the consumer, healthcare and insurance industries, which were detrimental to returns in 1999, were beneficial in 2000 as investors sought out profitable companies with proven business models. In the healthcare sector, we added to long-term pharmaceutical holdings when the group was pressured by concern over healthcare reform and patent expirations. Notably, Merck and Schering-Plough delivered strong results, driven by their existing drug pipelines, despite earlier warnings of slower growth. The Portfolio was not immune to the sell-off in technology, which initially impacted more speculative stocks in the industry but eventually hurt even profitable, established technology companies. Although the slowing economy has kept many technology companies from achieving lofty goals set earlier in 2000, we believe the industry as a whole continues to benefit from strong secular trends and is becoming very financially productive. Also, while euphoria over the Internet triggered a bubble in some parts of technology in 1999, the bursting of that bubble has led to unwarranted declines in technology leaders with strong competitive positions. Consistent with our investment discipline, our technology and telecommunications holdings have strong cash flows and are attractively valued. We thus believe that the current environment has created opportunity and that, despite near-term volatility, our strategy will prevail, as we believe these holdings are poised to lead the group in the long-term. LAZARD MID CAP PORTFOLIO Lazard Mid Cap Portfolio Institutional Shares posted a total return of 22.44%, while Open Shares posted a total return of 22.00%, beating the 8.25% return of the Russell Midcap(Reg. TM) Index. The Portfolio benefited from dramatic market rotation as our holdings in the finance, energy and consumer staples sectors rose strongly as investors sought out profitable companies with proven business models amid the overall market weakness. In 2000, as premium pricing improved and technology fell out of favor, our finance holdings such as Ambac and ACE surged. Even in the technology and telecommunications groups our holdings held up well due, in our opinion, to their solid valuations and proven business models. We maintained our holdings in 1999, as painful as it was, because we felt these companies' compelling valuations and demonstrated ability to generate strong returns on capital would, at some point, be rewarded. Technology and telecommunications holdings such as NCR Corp, Diebold and Cablevision contributed to strong performance. Compared to its index, the Portfolio's relative underweight position in utilities hurt returns, as the defensive sector benefited from a flight to safety during the year. However, the Portfolio's positioning has been beneficial to returns over the past few years. Companies will continue to seek to enhance their productivity by adopting new technologies that should result in more efficient product development, production, distribution, and customer relationship management. We seek to take advantage of the current market volatility and indiscriminate selling, by adhering to our disciplined investment philosophy. LAZARD SMALL CAP PORTFOLIO Lazard Small Cap Portfolio Institutional Shares posted a total return of 15.89%, while Open Shares posted a total return of 15.60%, beating the (3.02)% return of the Russell 2000(Reg. TM) Index. The insurance sector provides a good example of how the dramatic rotation in market environment impacted the Portfolio. In 1999, small cap insurance stocks were one of the worst performing market sectors, as weak premium pricing impacted short-term earnings and investors feared disintermediation by internet companies. We maintained our holdings in 1999 because we felt these companies' compelling valuations and demonstrated ability to generate strong returns on capital would be rewarded. In 2000, as premium pricing improved 3 ================================================================================ THE LAZARD FUNDS, INC. INVESTMENT OVERVIEW (CONTINUED) -------------------------------------------------------------------------------- and technology fell out of favor, our holdings such as Everest Re surged higher. Healthcare stocks were also weak in 1999, only to rebound in 2000 as money flowed out of the technology sector. In addition to sector rotation, healthcare also benefited from a more positive Medicare funding environment. Energy stocks also rebounded last year, and our focus on natural gas producers paid off as gas prices rose sharply as a result of improving supply/demand fundamentals. Our relatively high weight in utilities and stock selection in the transportation sector negatively impacted returns. While 2000 marked the end of the internet bubble, it is important to remember that the paradigm shift in the economy related to new technology is real. We believe companies will continue to seek to enhance their productivity by adopting new technologies that should result in more efficient product development, production, distribution, and customer relationship management. The Portfolio seeks to take advantage of the current market volatility and indiscriminate selling by adhering to our disciplined investment philosophy. Hence, we have constructed the Portfolio with what we believe are attractively-priced, financially productive companies that are leveraging the latest technologies to seek to maximize efficiency and shareholder returns. LAZARD GLOBAL EQUITY PORTFOLIO Lazard Global Equity Portfolio Institutional Shares posted a total return of (9.51)%, while Open Shares posted a total return of (9.72)%, beating the (13.18)% return of the MSCI World Index. Global merger and acquisition activity sustained its pace in 2000 as companies continued to reshape themselves by strengthening their core businesses and disposing of their nonessential units. In the UK, SmithKline Beecham and Glaxo Wellcome agreed to form the world's largest pharmaceutical company, GlaxoSmithKline, to leverage their research and development capacity. In the financial sector, Dai-Ichi Kangyo Bank, Fuji Bank and Industrial Bank of Japan broke traditional keiretsu lines to merge and create one of the world's largest banks, Mizuho Holdings. In the U.S., JPMorgan merged with Chase Manhattan Bank to compete with big investment houses. Meanwhile, in France, Vivendi, Seagram, and Canal Plus combined to form Vivendi Universal. Before year-end, the new entity disposed of its spirits operations and spun off its environmental businesses through an IPO to focus on the production and multi-access delivery of media content globally. In the food and beverages industry, Cadbury Schweppes, the UK-based confectionery and drinks group, bought Snapple, the non-carbonated soft drinks company, seeking to drive its return on equity higher by bolstering its beverage portfolio and more efficiently deploying capital. Overall, stock selection in industrials, including Minnesota Mining and Manufacturing and United Technologies, and technology, including Alcatel, positively impacted performance. Additionally, stock selection in the United States, United Kingdom and Japan added to performance relative to the benchmark. Alternatively, stock selection in financials and utilities was detrimental to the Portfolio's performance. Markets gyrate with changing sentiment and economic outlooks; however, we believe long-term performance is ultimately driven by valuations and corporate financial productivity. We will continue to construct a Portfolio of compellingly valued companies that are taking action to improve operating returns, and which we believe will outperform over a market cycle. LAZARD INTERNATIONAL EQUITY PORTFOLIO Lazard International Equity Portfolio Institutional Shares posted a total return of (10.55)%, while the Open Shares posted a total return of (10.95)%, beating the (14.16)% return of the MSCI EAFE Index. The Portfolio defended well in 2000 as rising energy prices, currency volatility, slowing economic growth and the dramatic end to the technology, media and telecommunications euphoria triggered losses in most global equity markets. Global merger and acquisition activity sustained its pace in 2000 as companies continued to reshape themselves by 4 ================================================================================ THE LAZARD FUNDS, INC. INVESTMENT OVERVIEW (CONTINUED) -------------------------------------------------------------------------------- seeking to strengthen their core businesses and disposing of their nonessential units. Examples that positively impacted the Portfolio included SmithKline Beecham and Glaxo Wellcome, who agreed to form the world's largest pharmaceutical company, GlaxoSmithKline, and Dai-Ichi Kangyo Bank, Fuji Bank and Industrial Bank of Japan, who broke traditional keiretsu lines to merge and create one of the world's largest banks, Mizuho Holdings. Strong stock selection in France, Germany and Netherlands all contributed to strong performance. Stock selection in financials hurt the Portfolio as Japanese financial stocks struggled despite making significant corporate changes. Additionally, the Portfolio's relative underweight in Switzerland hurt the Portfolio. We will continue to seek relative value opportunities among companies with strong competitive positions and the necessary strategic vision to excel, as we believe that the renewed emphasis on old-fashioned fundamental analysis will persist. LAZARD INTERNATIONAL SMALL CAP PORTFOLIO Lazard International Small Cap Portfolio Institutional Shares posted a total return of (4.44)%, while Open Shares posted a total return of (4.85)%, beating the (9.23)% return of the MSCI EAFE Small Cap Index. The Portfolio's outperformance of its benchmark was quite diversified, as eight countries and eight sectors were represented in the Portfolio's top ten holdings. One of the top performers was Nobel Biocare, the Swedish manufacturer of dental implants. The company reported good results for the third quarter and announced the introduction of a breakthrough treatment for dental implants. Swedish Match, another top holding in the Portfolio, was also among the strongest performers. The Swedish maker of consumer products reported strong results for the third quarter and announced a positive outlook for the future. Among the worst performing stocks was Gretag Imaging, the Swiss manufacturer of image processing equipment. The company announced a profit warning after it was forced to recall a recently introduced product. The company has taken swift action and we believe that most of the costs associated with the recall are behind them. In Japan, the Portfolio benefited from an underweight position, as the decline of the Yen and Japanese small caps helped the performance relative to its index. We continue to monitor the Portfolio closely. As the markets fall, we continue to search for financially productive companies at attractive valuations with management focused on creating value for our shareholders. LAZARD EMERGING MARKETS PORTFOLIO Lazard Emerging Markets Portfolio Institutional Shares posted a total return of (29.53)%, while Open Shares posted a total return of (29.80)%, beating the (30.61)% return of the MSCI Emerging Markets (Free) Index. Relative performance over the benchmark for 2000 came from positions such as ITC and Larsen & Toubro (both in India), on strong cigarette volume trends and a recovery in cement prices, respectively. Performance also came from the Indonesian tobacco company, Sampoerna, which performed well due to improving price and volume trends. Strong stock selection in financials and telecommunications services also helped performance. Several positions that detracted from performance included positions in Infosys and Satyam (India), Grupo Televisa (Mexico) and Hyundai Electronics (South Korea). Despite being the best performing region, all of Latin America's equity markets fell over the fourth quarter. Argentinean shares fell the hardest as the economy came close to experiencing a serious crisis caused by the effects of maintaining a convertible currency. The Mexican market also fell, as investors became increasingly nervous about a possible hard economic landing in the U.S. given Mexico's close economic dependency. Brazilian stocks performed less poorly amid continued signs of good economic health. We believe the current renewed emphasis on individual company fundamentals should persist because, in the long run, a company's worth is determined by its sustainable financial productivity. LAZARD BOND PORTFOLIO Lazard Bond Portfolio Institutional Shares posted a total return of 7.53% while Open Shares posted a total return of 7.25%, trailing the 10.12% return of the Lehman Intermediate Government/Corporate Bond Index. 5 ================================================================================ THE LAZARD FUNDS, INC. INVESTMENT OVERVIEW (CONTINUED) -------------------------------------------------------------------------------- The U.S. economy began 2000 exhibiting strong economic growth, driving the Federal Reserve to tighten monetary policy with a series of rate hikes in the first half of 2000. Rates were increased a total of three times, the last a 50 basis point move in early May. Long-term yields declined, spurred by a large budget surplus and expectations that government debt retirement would lead to an appreciation in the 30-year Treasury bond. Together, tight monetary policy and falling long-term yields caused a severe inversion of the U.S. yield curve that pushed risk premiums on non-government assets to historic highs. As a result, performance of most non-government sectors trailed Treasuries by a significant margin in 2000. The Portfolio's allocation to asset-backed securities, the best performing high-grade sector in 2000, was a positive, and the Portfolio was also underweight in the U.S. investment grade corporate market, which underperformed other high-grade spread asset sectors as credit concerns mounted during the year. These were positives for relative performance, but an overweight in lower-rated investment grade corporate issuers was a negative, as risk aversion drew investors to higher rated bonds. The mortgage pass-through market was also somewhat weak in 2000, and the Portfolio's overweight in lower coupon mortgages, which were more susceptible to widening spreads during the first quarter, was a negative. The high yield corporate sector suffered from a negative technical environment, as equity market volatility and outflows from high yield investors combined with credit concerns to create an environment where even fundamentally attractive issuers were punished severely for negative event news. This environment was particularly harsh for the Portfolio's high yield allocation, which emphasizes companies with proprietary or "niche" businesses that sometimes lack simple industry comparisons. The Portfolio also maintains a fairly sizable overweight of B-rated securities within its high yield allocation; these securities were out of favor in a risk-averse environment. Despite the pain endured in 2000, the Portfolio maintains positions in high yield issuers that we believe to be fundamentally attractive and that we believe are likely to rebound as the level of risk aversion begins to decline. LAZARD HIGH YIELD PORTFOLIO Lazard High Yield Portfolio Institutional Shares posted a total return of (15.19)% while Open Shares posted a total return of (15.54)%, trailing the (5.12)% return of the Merrill Lynch High Yield Master II Index. The year 2000 was a difficult one for U.S. high yield markets. Strong economic growth early in the year prompted the Federal Reserve to tighten monetary policy, resulting in a series of rate hikes during the first half. As the year progressed, it became apparent that the economy was slowing down, raising recessionary concerns among investors. Market sentiment deteriorated further, as banks tightened their lending standards, and capital markets became increasingly difficult to access, resulting in increased refinancing risks for issuers in high yield markets. The market retreated as investors responded with a flight to quality, and large sustained outflows from investment funds softened the footing. The low point came in October and November, when the broad market declined more than 3% in two consecutive months. This environment was particularly harsh for the Portfolio's long-term high yield strategy, which emphasizes companies with proprietary or "niche" businesses that sometimes lack simple industry comparisons. The Portfolio also maintains a fairly sizable overweight of B-rated securities, which were out of favor in a risk-averse environment. Despite the pain endured in 2000, the Portfolio maintains positions in issuers that we believe to be fundamentally attractive and that we believe are likely to rebound disproportionately as the level of risk aversion begins to decline. As year-end approached, the risk compensation available was near historic levels, providing attractive opportunities for the future. An improvement in market liquidity, prompted by a reversal of the Fed's tight monetary policy, should greatly benefit the Portfolio in 2001. LAZARD INTERNATIONAL FIXED-INCOME PORTFOLIO Lazard International Fixed-Income Portfolio Institutional Shares posted a total return of (4.70)% while Open Shares posted a total return of (4.92)%, trailing the (2.63)% return of the Salomon World Government Bond Index Ex-U.S. 6 ================================================================================ THE LAZARD FUNDS, INC. INVESTMENT OVERVIEW (CONTINUED) -------------------------------------------------------------------------------- European fixed income markets felt the pull of tighter monetary policy in 2000 as the European Central Bank raised rates six times during the year, for a total of 1.75%. Although the impact in Europe was muted relative to the U.S., risk premiums on non-government assets widened significantly during the year, as markets tried to decide whether monetary tightening would lead to an economic soft landing or something worse. As in the U.S., credit risk remained of paramount concern to bond investors. Yield spreads on investment grade corporate bonds, which had remained stable through the summer and early fall, widened sharply as a result of a slew of telecommunications downgrades and a chilling of investor appetites. Broad market corporate spreads widened from less than 100 to nearly 125 basis points during the second half. While this trend was somewhat negative for the Portfolio's corporate bond positions, rigorous credit analysis allowed us to avoid exposure to adverse events, providing some insulation. Several active measures reduced the impact of spread widening in Europe: an allocation to long-term U.K. corporate bonds performed well, as changes in U.K. regulatory guidelines spurred demand from pension fund investors, and the Portfolio's allocation to Danish mortgages also provided a positive contribution to relative performance. While risks are heightened relative to a year ago, we continue to see much opportunity in the blossoming Euro non-government market. The difficult credit environment was particularly unkind to the European high yield market, where volatile equity markets and a weak telecommunications sector pulled the group down. October and November marked the depths of the high yield market in Europe, with the broad market declining more than 6% in each month. The Portfolio's emphasis on upper tier industrial issuers and its cautious approach to the telecommunication sector paid off, as the Portfolio's European high yield positions outperformed the broad market by a wide margin. As year-end approached, the risk compensation available in global high yield markets was near historic levels, providing attractive opportunities for the future. While local currency emerging markets were soft in 2000, the Portfolio's strategy of maintaining a highly diversified allocation across roughly 25 to 30 countries again paid off. While broad emerging market local currency indices offered only modest returns, the combination of a high level of diversification, hedging of embedded developed currency exposure, and strong country selection drove the Portfolio's local currency allocation to significant outperformance. Looking ahead, easing of monetary policy by the U.S. Federal Reserve is generally very positive for emerging markets, resulting in cheaper commodities and reduced refinancing risk. It should also take some pressure off of the U.S. high yield market by improving liquidity. LAZARD STRATEGIC YIELD PORTFOLIO Lazard Strategic Yield Portfolio Institutional Shares posted a total return of 1.12% while Open Shares posted a total return of 0.71%, trailing the 6.43% return of the One Month LIBOR USD Fixed Index. The year 2000 was a difficult one for corporate high yield markets. Strong U.S. economic growth early in the year prompted the Federal Reserve to tighten monetary policy, resulting in a series of rate hikes during the first half. As the year progressed, it became apparent that the economy was slowing down, raising recessionary concerns among investors. Market sentiment deteriorated further, as banks tightened their lending standards, and capital markets became increasingly difficult to access, resulting in increased refinancing risks for issuers in high yield markets. The market retreated as investors responded with a flight to quality, and large sustained outflows from investment funds softened the footing. The low point came in October and November, when the broad market declined more than 3% in two consecutive months. This environment was particularly harsh for the Portfolio's long-term high yield strategy, which emphasizes companies with proprietary or "niche" businesses that sometimes lack simple industry comparisons. The Portfolio also maintains a fairly sizable overweight of B-rated securities, which were out of favor in a risk-averse environment. The difficult environment in U.S. high yield also spilled over to Europe, where volatile equity markets and a weak telecom sector pulled the European high yield market down. The Portfolio's emphasis on 7 ================================================================================ THE LAZARD FUNDS, INC. INVESTMENT OVERVIEW (CONCLUDED) -------------------------------------------------------------------------------- upper tier industrial issuers and its cautious approach to the telecommunications sector paid off, as the Portfolio's European high yield positions outperformed the broad market by a wide margin. We will also continue to look for opportunities to increase exposure to high yield if the market continues to exhibit a meaningful turnaround. Yield spreads on European investment grade corporate bonds also widened sharply, as a result of telecommunications downgrades and a chilling of investor appetites. While this trend was somewhat negative for the Portfolio's corporate bond positions, rigorous credit analysis allowed us to avoid exposure to adverse events, providing some insulation. Several active measures helped to mute the impact of general spread widening in Europe: an allocation to long-term U.K. corporate bonds performed well, as changes in U.K. regulatory guidelines spurred demand from pension fund investors, and the Portfolio's allocation to Danish mortgages also provided a positive contribution to relative performance. The allocation to developed non-U.S. markets was reduced mid-year and re-deployed into floating rate U.S. asset backed securities, greatly reducing the Portfolio's exposure to interest rate risk in a volatile market and adding a floating rate asset class which is more aligned with short-term interest rates. While local currency emerging markets were soft in 2000, the Portfolio's strategy of maintaining a highly diversified allocation across roughly 25 to 30 countries again paid off. While broad emerging market local currency indices offered only modest returns, the combination of a high level of diversification, hedging of embedded developed currency exposure, and strong country selection drove the Portfolio's local currency allocation to significant outperformance. NOTES TO INVESTMENT OVERVIEW: All returns are for the year ended December 31, 2000. The performance for the relevant indices are for the comparable period. Portfolio returns are net of fees and assume reinvestment of all dividends and distributions, if any. Certain expenses of a Portfolio have been waived and/or reimbursed by the Investment Manager and/or the Administrator; without such waiver/reimbursement of expenses, the Portfolio's total return would have been lower. Portfolio composition is subject to change. Past performance is not indicative, nor a guarantee, of future results. 8 ================================================================================ THE LAZARD FUNDS, INC. GROWTH CHARTS -------------------------------------------------------------------------------- THE PERFORMANCE DATA CONTAINED IN THE GROWTH CHARTS IS NOT AUTHORIZED FOR DISTRIBUTION TO PROSPECTIVE INVESTORS IN A PORTFOLIO UNLESS PRECEDED OR ACCOMPANIED BY AN EFFECTIVE PROSPECTUS. LAZARD EQUITY PORTFOLIO Lazard Equity Portfolio seeks long-term capital appreciation. The Portfolio invests primarily in equity securities, principally common stocks, of relatively large U.S. companies with market capitalizations in the range of the S&P 500(R) Index that the Investment Manager believes are undervalued based on their earnings, cash flow or asset values. COMPARISON OF $10,000 INVESTMENT IN THE INSTITUTIONAL SHARES OF LAZARD EQUITY PORTFOLIO, S&P 500 INDEX, S&P/BARRA VALUE(R) INDEX AND RUSSELL 1000(R) VALUE INDEX [Data below represents line chart in the printed piece] LAZARD EQUITY S&P 500 S&P/BARRA RUSSELL 1000 PORTFOLIO INDEX VALUE INDEX VALUE INDEX ------------- ------- ----------- ----------- Dec-90 10000 10000 10000 10000 Jan-91 10399 10435.5 10473 10450.3 Feb-91 11170.9 11181.8 11155.8 11145.1 Mar-91 11292.3 11452.7 11257.4 11310 Apr-91 11274.5 11479.8 11346.3 11393.7 May-91 11631.2 11975 11887.5 11818.7 Jun-91 11100.5 11426.5 11296.7 11321.1 Jul-91 11622.7 11959.1 11745.2 11794.9 Aug-91 12111 12242.4 11915.5 12009.7 Sep-91 11945.3 12037.6 11790.4 11921.4 Oct-91 12084.9 12199.3 11962.5 12118.9 Nov-91 11448 11707.8 11295 11497 Dec-91 12753.3 13046.9 12256.2 12460.5 Jan-92 12887.7 12803.8 12256.2 12480.2 Feb-92 13228.7 12969.6 12505 12785.8 Mar-92 12825.7 12717.3 12308.7 12600.4 Apr-92 12767.2 13090.7 12909.3 13142.9 May-92 12746.5 13154.9 12945.5 13208.5 Jun-92 12238.7 12959.1 12839.3 13126.2 Jul-92 12587.7 13488.5 13302.8 13633.2 Aug-92 12234.5 13212.4 12917 13216.1 Sep-92 12421.5 13367.6 13059.1 13399 Oct-92 12630.4 13413.8 12954.7 13411.5 Nov-92 13234.8 13870.5 13305.7 13851.5 Dec-92 13423.8 14040.7 13546.6 14181.5 Jan-93 13676.7 14158.1 13920.5 14593.3 Feb-93 13834.8 14351 14400.7 15107.3 Mar-93 14435.3 14653.8 14798.2 15552.5 Apr-93 14141.9 14299.7 14739 15353.3 May-93 14511.6 14682.2 15014.6 15661.9 Jun-93 14596.1 14725.2 15212.8 16007.2 Jul-93 14624.9 14666 15401.4 16186.2 Aug-93 15168.2 15222.4 16005.2 16770.6 Sep-93 15146.5 15105.7 15998.8 16797.3 Oct-93 15761 15418.2 16085.6 16785.7 Nov-93 15641 15271.3 15797.9 16439.3 Dec-93 15923 15455.9 16066.8 16751.6 Jan-94 16725.5 15981.4 16815.8 17385.5 Feb-94 16507.7 15547.7 16207.4 16790.9 Mar-94 15785.4 14869.8 15540.8 16166.3 Apr-94 16049.1 15060.4 15868.1 16476.3 May-94 16239.4 15307.6 16130.7 16666.2 Jun-94 15860.7 14932.4 15684.5 16267 Jul-94 16419 15422.8 16214.6 16773.1 Aug-94 17155.9 16055.1 16673 17255 Sep-94 16879.6 15662.6 16086.1 16682.3 Oct-94 17117.1 16014.5 16436.3 16914.8 Nov-94 16505.3 15431.2 15770.3 16231.5 Dec-94 16596.4 15660.1 15964 16418.4 Jan-95 16874 16066.2 16396.3 16923.8 Feb-95 17610.3 16692.2 17033 17593 Mar-95 18105.2 17184.8 17502.6 17979 Apr-95 18609.8 17690.9 18078.8 18547.1 May-95 19384.7 18398 18883.1 19327.8 Jun-95 19990.1 18825.4 19026.4 19589.6 Jul-95 20749 19449.7 19681.9 20271.6 Aug-95 21064.9 19498.5 19849.9 20558 Sep-95 21793.8 20321.3 20540.3 21301.4 Oct-95 21647.9 20248.8 20220.5 21089.8 Nov-95 22647.9 21137.7 21280.3 22158.1 Dec-95 22851.3 21544.8 21870.2 22714.9 Jan-96 23638.8 22278.2 22524.9 23422.7 Feb-96 24308.2 22484.7 22736.2 23599.8 Mar-96 24505.1 22701.2 23268.5 24000.9 Apr-96 25030.8 23035.9 23505.4 24093.1 May-96 25329.1 23630 23859.6 24394.3 Jun-96 25071.5 23720 23744.3 24414.3 Jul-96 23707.6 22672 22742.6 23491.7 Aug-96 24510.1 23150.2 23370.3 24163.5 Sep-96 25394.2 24453.1 24371.2 25124 Oct-96 26003.2 25127.5 25197.4 26095.3 Nov-96 27757.7 27026.9 27125 27987.5 Dec-96 27401.4 26491.5 26680.2 27630.4 Jan-97 28711.6 28146.7 27910.1 28969.9 Feb-97 29053.4 28367.3 28113.8 29395.4 Mar-97 27971 27201.7 27152.3 28338.4 Apr-97 28811.3 28825.7 28170.6 29528.9 May-97 30835 30580.6 29937.4 31178.4 Jun-97 31847.4 31950.6 31081 32515.9 Jul-97 34233.8 34492.9 33567.5 34962.1 Aug-97 33037.3 32560.6 32050.3 33716.4 Sep-97 34473.1 34343.9 33928.4 35754.2 Oct-97 32500.7 33196.9 32681.5 34755.2 Nov-97 33597.5 34733.5 33927.4 36291.8 Dec-97 34286.1 35329.9 34680.6 37351.1 Jan-98 34234.7 35720.7 34252.9 36822.6 Feb-98 36688.6 38296.8 36822.2 39301.5 Mar-98 38850.8 40258 38687.3 41705.2 Apr-98 39142.5 40663 39145.4 41984.2 May-98 38113.1 39963.6 38594.6 41361.6 Jun-98 38802.9 41586.9 38887.5 41891.8 Jul-98 37801.8 41142 38043.6 41152.4 Aug-98 31817.8 35185.4 31926.2 35028.1 Sep-98 32975.9 37442.6 33866.1 37038.8 Oct-98 36501.1 40492.3 36518.8 39907.8 Nov-98 38727.6 42948.1 38421.1 41767.1 Dec-98 40220.2 45427.1 39770.4 43188.8 Jan-99 41145.2 47319.1 40573.8 43533.9 Feb-99 39758.7 45849.9 39700.2 42919.6 Mar-99 40720.4 47686.1 40903.5 43807.6 Apr-99 43236.1 49534 44429.8 47899.3 May-99 42698.7 48364.5 43644.8 47372.9 Jun-99 44603.9 51048.7 45321.1 48748.1 Jul-99 43363.9 49455 43927.5 47320.8 Aug-99 41776.8 49207.7 42816.1 45564.7 Sep-99 39742.3 47858.4 41140.8 43972.2 Oct-99 41645.1 50887.4 43463.1 46503.2 Nov-99 41607.7 51921.9 43208.5 46139.6 Dec-99 41919.7 54980.1 44831.8 46362.4 Jan-00 40528.4 52217.9 43405.2 44850.1 Feb-00 38678.7 51229.5 40693.3 41517.7 Mar-00 41880.9 56241.3 44936.4 46583.3 Apr-00 41085.2 54545.8 44635.8 46041.1 May-00 41303.7 53426.5 44775 46526.4 Jun-00 40488.8 54743.5 43006.4 44400.1 Jul-00 40070.6 53888.9 43867 44956 Aug-00 42271.6 57232.2 46807.8 47457.3 Sep-00 40278.5 54213.2 46796.6 47892.1 Oct-00 42088.2 53984 47670.7 49068.3 Nov-00 39647.1 49727.9 45231.4 47246.9 Dec-00 40812.8 49970.6 47559 49613.9 LAZARD MID CAP PORTFOLIO Lazard Mid Cap Portfolio seeks long-term capital appreciation. The Portfolio invests primarily in equity securities, principally common stocks, of medium-size U.S. companies with market capitalizations in the range of the Russell Midcap(R) Index that the Investment Manager believes are undervalued based on their earnings, cash flow or asset values. COMPARISON OF $10,000 INVESTMENT IN THE INSTITUTIONAL SHARES OF LAZARD MID CAP PORTFOLIO, RUSSELL MIDCAP INDEX AND RUSSELL MIDCAP VALUE INDEX [Data below represents line chart in the printed piece] LAZARD MID CAP RUSSELL MIDCAP RUSSELL MIDCAP PORTFOLIO INDEX VALUE INDEX -------------- ------------- -------------- 10000 10000 10000 11/4/97 9990 10033.3 10166.9 Dec-97 10274.7 10309.2 10555.9 Jan-98 10284.7 10115.4 10350.8 Feb-98 11145.9 10906.4 11042.3 Mar-98 11656.6 11423.4 11610.8 Apr-98 11696.7 11452 11546 May-98 11115.9 11097.5 11276.3 Jun-98 10915.8 11251.2 11312.2 Jul-98 10174.6 10714.6 10738.7 Aug-98 8674.86 9000.83 9228.75 Sep-98 9095.59 9583.37 9767.24 Oct-98 9536.73 10236.9 10399.8 Nov-98 10128 10721.6 10765.2 Dec-98 10650.1 11350.4 11092.4 Jan-99 10538.3 11330.9 10833.9 Feb-99 10222.1 10954 10595.7 Mar-99 10425.5 11297.2 10747 Apr-99 11342 12131.7 11764.9 May-99 11474.7 12096.9 11814 Jun-99 11739.2 12523.9 11948.7 Jul-99 11199.2 12179.5 11649.6 Aug-99 10476.2 11864.8 11247 Sep-99 10026.3 11447.7 10677.7 Oct-99 10445.8 11990.3 10992.8 Nov-99 10722 12335.2 10791.2 Dec-99 11116.5 13420.2 11080.3 Jan-00 10219.5 12976 10417.5 Feb-00 10642.6 13973.3 9981.89 Mar-00 11797.7 14773.5 11192 Apr-00 11643.1 14074.3 11236.8 May-00 11838.7 13701.6 11429.9 Jun-00 11674.2 14106.9 11003.9 Jul-00 11612.3 13948.6 11261.1 Aug-00 12732.3 15285.4 11951.5 Sep-00 12876.2 15067.6 12065.9 Oct-00 13258.6 14835 12295.2 Nov-00 12769.4 13499.8 12134.9 Dec-00 13612.2 14527.2 13205.2 PAST PERFORMANCE IS NOT INDICATIVE, NOR A GUARANTEE, OF FUTURE RESULTS. 9 ================================================================================ THE LAZARD FUNDS, INC. GROWTH CHARTS (CONTINUED) -------------------------------------------------------------------------------- LAZARD SMALL CAP PORTFOLIO Lazard Small Cap Portfolio seeks long-term capital appreciation. The Portfolio invests primarily in equity securities, principally common stocks, of relatively small U.S. companies with market capitalizations in the range of the Russell 2000(R) Index that the Investment Manager believes are undervalued based on their earnings, cash flow or asset values. COMPARISON OF $10,000 INVESTMENT IN THE INSTITUTIONAL SHARES OF LAZARD SMALL CAP PORTFOLIO, RUSSELL 2000 INDEX AND RUSSELL 2000 VALUE INDEX [Data below represents line chart in the printed piece] LAZARD SMALL CAP RUSSELL 2000 RUSSELL 2000 PORTFOLIO INDEX VALUE ---------------- ----------- ------------ 10/30/91 10000 10000 10000 Nov-91 9720 9537.2 9594.2 Dec-91 10453.5 10300.4 10216.3 Jan-92 11316.3 11135.7 11070.9 Feb-92 11827.9 11460.8 11599 Mar-92 11827.9 11073 11472.8 Apr-92 11547 10684.3 11313.9 May-92 11557 10826.4 11621.5 Jun-92 10955.1 10317.7 11245.2 Jul-92 11256.1 10676.3 11668.8 Aug-92 10935.1 10374.4 11441.4 Sep-92 11015.3 10613.3 11657.4 Oct-92 11547 10948.2 11929.5 Nov-92 12560.3 11786.7 12667.5 Dec-92 13041.3 12197 13192.9 Jan-93 13443.2 12609.5 13892.9 Feb-93 13563.7 12318.7 13948.4 Mar-93 14216.8 12718.3 14477.5 Apr-93 13885.2 12368.7 14129.6 May-93 14528.2 12915.7 14574 Jun-93 14920.1 12996 14711.4 Jul-93 15045.6 13175.4 14964 Aug-93 15925.8 13744.3 15548.8 Sep-93 16232.9 14132.2 15921.5 Oct-93 16386.4 14496.1 16286.1 Nov-93 16171.5 14023.8 15871.6 Dec-93 16965.6 14503 16338.6 Jan-94 17588.2 14957.4 16920.6 Feb-94 17599.3 14903.1 16871 Mar-94 16765.4 14118.2 16116 Apr-94 16743.2 14201.9 16274.4 May-94 16787.7 14042.1 16251.2 Jun-94 16598.7 13568.3 15829.4 Jul-94 16947.6 13791.4 16122 Aug-94 17926.5 14559.6 16756.1 Sep-94 17926.5 14510.2 16577.8 Oct-94 17641.9 14451.6 16273.7 Nov-94 16754.2 13867.6 15616.8 Dec-94 17310.3 14238.8 16085.4 Jan-95 17238 14059 16007.6 Feb-95 17973.8 14644.3 16600.3 Mar-95 18408.1 14895.3 16681.2 Apr-95 18794.1 15226.2 17177.3 May-95 19349 15488 17545.6 Jun-95 20217.5 16291.5 18145.1 7/1/95 21146.9 17229.9 18807.2 Aug-95 21255.6 17586.4 19365.9 Sep-95 21267.7 17900.5 19655.1 Oct-95 20047.9 17100 18870.1 Nov-95 20893.3 17818.3 19620 Dec-95 21036.4 18288.4 20227.8 Jan-96 21221 18268.6 20361.9 Feb-96 22012.3 18838.1 20681 Mar-96 22408 19221.4 21115.1 Apr-96 23283.4 20249.2 21691.1 May-96 24063.1 21047.2 22240.3 Jun-96 23375.9 20183 21977.6 Jul-96 21697.7 18420.2 20809.3 Aug-96 23098.4 19489.7 21712.2 Sep-96 23930.9 20251.4 22305 Oct-96 24142.3 19939.3 22563.7 Nov-96 25582.7 20760.8 23777.9 Dec-96 26070.4 21304.9 24549.7 Jan-97 26819.7 21730.6 24927 Feb-97 26720.8 21203.6 25163.6 Mar-97 25745.3 20203 24488.7 Apr-97 26494.6 20259.4 24848.7 May-97 29083.2 22513.3 26826.9 Jun-97 30426.2 23478.2 28184.6 Jul-97 31942.5 24570.6 29367.5 Aug-97 32621.2 25132.8 29833.8 Sep-97 34108.6 26972.3 31817.8 Oct-97 32765.6 25787.4 30952.7 Nov-97 32621.1 25620.5 31291.9 Dec-97 33384.9 26068.9 32352.7 Jan-98 33068.1 25657.5 31767.4 Feb-98 35436.1 27554.7 33687.8 Mar-98 36703.5 28691 35054.2 Apr-98 36803.5 28849.7 35227.3 May-98 34869.1 27295.8 33980.3 Jun-98 33784.7 27353.1 33788.3 Jul-98 31399.5 25138.9 31141.7 Aug-98 25144.7 20257.4 26264.6 Sep-98 25833.7 21842.8 27747.7 Oct-98 27326.9 22733.5 28571.6 Nov-98 28450 23924.5 29345 Dec-98 29172.6 25405 30265.2 Jan-99 28953.8 25742.6 29578.2 Feb-99 26875 23657.7 27558.9 Mar-99 26892.2 24027 27331.6 Apr-99 29793.8 26180.1 29826.7 May-99 31235.8 26562.3 30743.5 Jun-99 32374.4 27762.9 31856.8 Jul-99 31905 27001.1 31100.8 Aug-99 30105.5 26002.1 29964.1 Sep-99 29566.6 26007.3 29365.1 Oct-99 28098.7 26114.2 28777.5 Nov-99 28656.1 27672.1 28926.5 Dec-99 29687.8 30804.6 29815.2 Jan-00 28684.3 30310.2 29035.5 Feb-00 28291.3 35315.6 30810.2 Mar-00 30853.4 32987.3 30954.7 Apr-00 31121.8 31002.1 31137.9 May-00 30655.6 29195.3 30662.7 Jun-00 30906.1 31740.2 31558.7 Jul-00 31138.8 30719.1 32610.2 Aug-00 32815 33062.9 34068.9 Sep-00 32452.7 32090.9 33874.7 Oct-00 32833.7 30658.7 33754.4 Nov-00 31582.7 27511.6 33067.5 Dec-00 34407.2 29874.8 36620.6 LAZARD GLOBAL EQUITY PORTFOLIO Lazard Global Equity Portfolio seeks long-term capital appreciation. The Portfolio invests primarily in equity securities, principally common stocks, of relatively large U.S and non-U.S companies with market capitalizations in the range of the Morgan Stanley Capital International (MSCI(R)) World Index that the Investment Manager believes are undervalued based on their earnings, cash flow or asset values. COMPARISON OF $10,000 INVESTMENT IN THE INSTITUTIONAL SHARES OF LAZARD GLOBAL EQUITY PORTFOLIO AND MSCI WORLD INDEX [Data below represents line chart in the printed piece] LAZARD GLOBAL MSCI EQUITY WORLD PORTFOLIO INDEX ------------ -------- 1/4/96 10000 10000 Jan-96 10010 10117.9 Feb-96 10170 10177.4 Mar-96 10310 10344.6 Apr-96 10430 10585.7 May-96 10460 10592.7 Jun-96 10530 10644.2 Jul-96 10160 10265.9 Aug-96 10290 10381.8 Sep-96 10620 10786.2 Oct-96 10720 10859.3 Nov-96 11570 11465.7 Dec-96 11578.4 11279.9 Jan-97 11550 11413.7 Feb-97 11749.8 11542.8 Mar-97 11679.2 11312.3 Apr-97 11911.2 11679.9 May-97 12451.4 12398.7 Jun-97 13215.2 13014.9 Jul-97 13717.5 13612.2 Aug-97 12974.6 12699.5 Sep-97 13780.2 13387.3 Oct-97 12900 12680.5 Nov-97 13131.5 12902.8 Dec-97 13345.5 13057.9 Jan-98 13592.2 13419.6 Feb-98 14500.6 14325.2 Mar-98 15442.7 14927.9 Apr-98 15610.9 15071.5 May-98 15644.5 14880.4 Jun-98 15779.1 15231.6 Jul-98 15768 15204.9 Aug-98 13454.9 13175 Sep-98 13193.3 13405.7 Oct-98 14349 14615.3 Nov-98 15211.4 15482.2 Dec-98 15627.3 16236.2 Jan-99 15864.8 16589.4 Feb-99 15412.7 16145.7 Mar-99 16043.7 16815.6 Apr-99 16828.8 17476.1 May-99 16401.4 16835.2 Jun-99 17221.5 17618 Jul-99 17150.8 17563.4 Aug-99 17049.1 17529.8 Sep-99 16762 17357.4 Oct-99 17298.4 18256.5 Nov-99 17537.1 18767.7 Dec-99 18193 20284.5 Jan-00 17206 19120.5 Feb-00 17030.5 19169.8 Mar-00 18154.6 20492.5 Apr-00 17556.2 19623.7 May-00 17468.4 19124.5 Jun-00 17730.8 19765.9 Jul-00 17317.7 19207.1 Aug-00 17691.7 19829.5 Sep-00 16826.2 18772.8 Oct-00 16851.5 18456 Nov-00 16035.9 17333.1 Dec-00 16462.4 17611.2 PAST PERFORMANCE IS NOT INDICATIVE, NOR A GUARANTEE, OF FUTURE RESULTS. 10 ================================================================================ THE LAZARD FUNDS, INC. GROWTH CHARTS (CONTINUED) -------------------------------------------------------------------------------- LAZARD INTERNATIONAL EQUITY PORTFOLIO Lazard International Equity Portfolio seeks long-term capital appreciation. The Portfolio invests primarily in equity securities, principally common stocks, of relatively large non-U.S. companies with market capitalizations in the range of the Morgan Stanley Capital International (MSCI) Europe, Australasia and Far East (EAFE(R)) Index that the Investment Manager believes are undervalued based on their earnings, cash flow or asset values. COMPARISON OF $10,000 INVESTMENT IN THE INSTITUTIONAL SHARES OF LAZARD INTERNATIONAL EQUITY PORTFOLIO AND MSCI EAFE INDEX [Data below represents line chart in the printed piece] LAZARD INTERNATIONAL MSCI EQUITY EAFE PORTFOLIO INDEX -------------- ------- 10/29/91 10000 10000 Nov-91 9990 9533.13 Dec-91 10319.2 10025.6 Jan-92 10459.4 9811.65 Feb-92 10569.6 9460.46 Mar-92 10319.2 8835.87 Apr-92 10539.6 8877.43 May-92 11030.5 9471.63 Jun-92 10820.1 9022.68 Jul-92 10198.9 8791.76 Aug-92 10078.7 9343.19 Sep-92 9627.87 9158.69 Oct-92 9457.55 8678.28 Nov-92 9417.48 8759.94 Dec-92 9635.88 8805.25 Jan-93 9554.57 8804.12 Feb-93 9768.02 9070.12 Mar-93 10042.5 9860.73 Apr-93 10266.1 10796.5 May-93 10550.7 11024.6 Jun-93 10428.7 10852.6 Jul-93 10744.8 11232.5 Aug-93 11539.2 11838.8 Sep-93 11203.1 11572.3 Oct-93 11793.8 11929 Nov-93 11569.8 10886.3 Dec-93 12627.6 11672.3 Jan-94 13826.8 12659.2 Feb-94 13396.3 12624.1 Mar-94 12842.8 12080.4 Apr-94 13324.6 12592.9 May-94 13242.6 12520.6 Jun-94 12955.6 12697.6 Jul-94 13598.4 12819.7 Aug-94 14217 13123.2 Sep-94 13526.3 12709.8 Oct-94 13763.4 13133 Nov-94 12938.6 12501.9 Dec-94 12657.4 12580.1 Jan-95 12048.8 12096.8 Feb-95 12127.7 12062.1 Mar-95 12285.5 12814.4 Apr-95 12815.2 13296.3 May-95 12927.9 13137.8 Jun-95 13142.1 12907.4 Jul-95 13976.1 13711 Aug-95 13728.2 13188 Sep-95 14032.5 13445.5 Oct-95 13807 13084.1 Nov-95 13942.3 13448.1 Dec-95 14320.6 13989.9 Jan-96 14400.8 14047.4 Feb-96 14607 14094.9 Mar-96 14962.2 14394.3 Apr-96 15333.9 14812.7 May-96 15230.3 14540.2 Jun-96 15518.1 14622 Jul-96 15091.4 14194.6 Aug-96 15114.4 14225.7 Sep-96 15471.2 14603.7 Oct-96 15540.3 14454.3 Nov-96 16357.6 15029.4 Dec-96 16559.8 14836.1 Jan-97 16134.2 14316.9 Feb-97 16535.5 14551.1 Mar-97 16936.7 14603.8 Apr-97 16814.8 14681.3 May-97 17520.1 15636.6 Jun-97 18609.7 16499 Jul-97 19038.2 16765.9 Aug-97 17838.4 15513.9 Sep-97 19344.3 16383 Oct-97 18144.5 15123.7 Nov-97 18266.9 14969.5 Dec-97 18520.4 15100.1 Jan-98 18957.9 15790.2 Feb-98 20045 16803.3 Mar-98 21291.2 17320.7 Apr-98 21635.9 17457.8 May-98 22220.1 17373.1 Jun-98 21982.3 17505.1 Jul-98 22248.3 17682.6 Aug-98 19193.6 15491.9 Sep-98 18220.5 15017 Oct-98 19605.2 16582.3 Nov-98 20724.7 17431.9 Dec-98 21493.2 18119.4 Jan-99 21409.3 18065.9 Feb-99 20844.1 17635.3 Mar-99 21536.2 18371.6 Apr-99 22537.6 19115.9 May-99 21719.5 18131.5 Jun-99 22651.2 18838.5 Jul-99 23371.6 19398.6 Aug-99 23822.6 19469.4 Sep-99 23808.3 19665.4 Oct-99 24460.7 20402.1 Nov-99 24901 21110.7 Dec-99 26668.9 23005.4 Jan-00 24539.7 21543.7 Feb-00 24678.3 22123.7 Mar-00 25835 22982.1 Apr-00 24786.1 21772.7 May-00 24554.8 21240.9 Jun-00 25465.8 22071.6 Jul-00 24878.9 21146.3 Aug-00 24883.9 21329.8 Sep-00 23816.4 20291.2 Oct-00 23483 19811.9 Nov-00 22925.7 19069 Dec-00 23854.2 19746.8 LAZARD INTERNATIONAL SMALL CAP PORTFOLIO Lazard International Small Cap Portfolio seeks long-term capital appreciation. The Portfolio invests primarily in equity securities, principally common stocks, of relatively small non-U.S. companies with market capitalizations in the range of the Morgan Stanley Capital International (MSCI) Europe, Australasia and Far East (EAFE) Small Cap Index that the Investment Manager believes are undervalued based on their earnings, cash flow or asset values. COMPARISON OF $10,000 INVESTMENT IN THE INSTITUTIONAL SHARES OF LAZARD INTERNATIONAL SMALL CAP PORTFOLIO AND MSCI EAFE SMALL CAP INDEX [Data below represents line chart in the printed piece] LAZARD MSCI INTERNATIONAL EAFE SMALL CAP SMALL CAP PORTFOLIO INDEX ------------- ---------- 12/1/93 10000 10000 Dec-93 10872.5 10854.3 Jan-94 12082.8 12056.9 Feb-94 11882.7 12286.4 Mar-94 11162.6 12009.5 Apr-94 11042.5 12515.7 May-94 10992.5 12357.5 Jun-94 10712.5 12610.7 Jul-94 10912.5 12634.4 Aug-94 11352.6 12761 Sep-94 11002.5 12302.1 Oct-94 11092.6 12476.1 Nov-94 10612.5 11605.9 Dec-94 10382.4 11756.3 Jan-95 10072.3 11305.3 Feb-95 10012.3 11155 Mar-95 9782.26 11384.4 Apr-95 10002.3 11637.6 May-95 10272.4 11368.6 Jun-95 10362.4 11115.4 Jul-95 10752.5 11827.5 Aug-95 10652.5 11495.2 Sep-95 10962.5 11463.5 Oct-95 10532.4 11004.7 Nov-95 10502.4 11139.1 Dec-95 10567.7 11519 Jan-96 10738.7 11867 Feb-96 10829.2 11977.8 Mar-96 10969.9 12215.1 Apr-96 11412.3 12856 May-96 11492.8 12594.8 Jun-96 11533 12579.1 Jul-96 11130.8 11882.8 Aug-96 11482.7 11922.4 Sep-96 11553.1 11977.8 Oct-96 11643.6 11764.2 Nov-96 12186.6 11914.4 Dec-96 12221.5 11503.1 Jan-97 12385.4 11271 Feb-97 12621 11481.2 Mar-97 12426.3 11191.5 Apr-97 11985.8 10818.4 May-97 12556.1 11638 Jun-97 13124 11847.6 Jul-97 13010.4 11430.7 Aug-97 12618 10701.2 Sep-97 13351.2 10475.4 Oct-97 12711 9895.18 Nov-97 12308.2 9205.22 Dec-97 12254.2 8668.49 Jan-98 12526.7 9210.4 Feb-98 13679.8 10035.8 Mar-98 14780.5 10257.6 Apr-98 15440.9 10237.8 May-98 15786.8 10271.2 Jun-98 15314.8 9862.51 Jul-98 15115.7 9727.81 Aug-98 13341.1 8433.37 Sep-98 12315.2 8045.6 Oct-98 12657.5 8690.12 Nov-98 12753.7 9105.26 Dec-98 13179.7 9140.23 Jan-99 12949.1 9025.2 Feb-99 12787.2 8911.32 Mar-99 12996 9393.88 Apr-99 13642.6 10092.2 May-99 13399.8 9726.32 Jun-99 14047 10243.5 Jul-99 14601.8 10556.7 Aug-99 14853.7 10781 Sep-99 15017.1 10747.1 Oct-99 14866.2 10599.8 Nov-99 15412.4 10657.3 Dec-99 16616.1 10755.8 Jan-00 16662.6 10768.6 Feb-00 17204.8 11033.2 Mar-00 17534.4 11294.6 Apr-00 16734.4 10446 May-00 16510.1 10424.6 Jun-00 16804.7 11341.4 Jul-00 16440 10627.9 Aug-00 16786.9 11130.1 Sep-00 16442.2 10490.3 Oct-00 15871.7 9760.69 Nov-00 15480.5 9731.24 Dec-00 15878.3 9762.53 PAST PERFORMANCE IS NOT INDICATIVE, NOR A GUARANTEE, OF FUTURE RESULTS. 11 ================================================================================ THE LAZARD FUNDS, INC. GROWTH CHARTS (CONTINUED) -------------------------------------------------------------------------------- LAZARD EMERGING MARKETS PORTFOLIO Lazard Emerging Markets Portfolio seeks long-term capital appreciation. The Portfolio invests primarily in equity securities, principally common stocks, of non-U.S. companies whose principal activities are located in emerging market countries that the Investment Manager believes are undervalued based on their earnings, cash flow or asset values. COMPARISON OF $10,000 INVESTMENT IN THE INSTITUTIONAL SHARES OF LAZARD EMERGING MARKETS PORTFOLIO AND MORGAN STANLEY CAPITAL INTERNATIONAL (MSCI) EMERGING MARKETS (FREE) INDEX [Data below represents line chart in the printed piece] LAZARD EMERGING MSCI EMERGING MARKETS MARKETS (FREE) PORTFOLIO INDEX --------------- -------------- 7/15/94 10000 10000 Jul-94 10210 10280 Aug-94 11300 11555.8 Sep-94 11660 11687.5 Oct-94 11580 11477.1 Nov-94 11320 10880.3 Dec-94 9860 10006.6 Jan-95 8640 8941.91 Feb-95 8420 8712.99 Mar-95 8400 8768.76 Apr-95 8650 9162.48 May-95 9160 9649.92 Jun-95 9140 9678.87 Jul-95 9490 9896.16 Aug-95 9370 9663.01 Sep-95 9460 9617.11 Oct-95 9040 9248.96 Nov-95 8920 9084.05 Dec-95 9280.04 9486.93 Jan-96 10163.9 10161.3 Feb-96 10244.2 9999.7 Mar-96 10244.2 10077.6 Apr-96 10897.5 10480.5 May-96 11269.2 10433.7 Jun-96 11168.7 10498.8 Jul-96 10676.6 9781.27 Aug-96 10867.4 10031.7 Sep-96 11168.7 10118.5 Oct-96 11048.2 9848.69 Nov-96 11369.6 10013.8 Dec-96 11472.7 10059 Jan-97 12240.3 10745.1 Feb-97 12762.2 11205.3 Mar-97 12639.4 10911 Apr-97 12772.4 10930.3 May-97 13189.1 11243.1 Jun-97 14164.6 11844.9 Jul-97 14143.8 12021.7 Aug-97 12597.6 10491.9 Sep-97 13178.8 10782.7 Oct-97 10770 9013.36 Nov-97 10252.5 8684.48 Dec-97 10343.9 8893.76 Jan-98 9781.73 8196.22 Feb-98 10625 9051.71 Mar-98 11243.4 9444.52 Apr-98 11175.9 9341.64 May-98 9837.95 8061.45 Jun-98 9276.2 7215.84 Jul-98 9535.01 7444.62 Aug-98 6649.72 5292.08 Sep-98 7088.6 5627.79 Oct-98 7684.75 6220.4 Nov-98 8247.27 6737.74 Dec-98 7914.91 6640.1 Jan-99 7356.11 6532.97 Feb-99 7344.34 6596.51 Mar-99 8404.5 7465.87 Apr-99 9293.28 8389.55 May-99 9020.05 8340.75 Jun-99 10103.4 9287.36 Jul-99 9818.45 9034.74 Aug-99 9640.73 9116.94 Sep-99 9286.73 8808.79 Oct-99 9446.27 8996.35 Nov-99 10657.3 9803.01 Dec-99 12330.5 11049.8 Jan-00 12007.5 11115.6 Feb-00 12100 11262.3 Mar-00 12158.1 11317.3 Apr-00 10902.2 10244.4 May-00 10418.1 9820.9 Jun-00 11282.3 10166.8 Jul-00 10659.7 9643.96 Aug-00 10820.7 9691.38 Sep-00 9898.76 8845.16 Oct-00 9253.56 8203.86 Nov-00 8331.9 7486.57 Dec-00 8689.34 7667.31 LAZARD BOND PORTFOLIO Lazard Bond Portfolio seeks to build and preserve capital. The Portfolio invests in a range of bonds and other fixed-income securities, including mortgage-backed securities, asset-backed securities, municipal securities, corporate fixed-income securities and U.S. Government securities. COMPARISON OF $10,000 INVESTMENT IN THE INSTITUTIONAL SHARES OF LAZARD BOND PORTFOLIO AND LEHMAN INTERMEDIATE GOVERNMENT/CORPORATE BOND INDEX [Data below represents line chart in the printed piece] LEHMAN INTERMEDIATE LAZARD BOND GOVERNMENT/CORPORATE PORTFOLIO BOND INDEX ----------- -------------------- 11/12/91 10000 10000 Nov-91 10103.5 10114.8 Dec-91 10392.2 10361.8 Jan-92 10277.7 10268 Feb-92 10304.8 10308.6 Mar-92 10242.6 10268 Apr-92 10323.3 10358.3 May-92 10467 10518.8 Jun-92 10599.7 10674.5 Jul-92 10810.9 10886.8 Aug-92 10912.9 10995.7 Sep-92 11037.2 11145 Oct-92 10891.4 11000.4 Nov-92 10843.6 10958.5 Dec-92 10983.3 11105.3 Jan-93 11180.9 11321.3 Feb-93 11360.5 11499.8 Mar-93 11383.2 11545.5 Apr-93 11464.6 11638.5 May-93 11409.8 11612.6 Jun-93 11626 11794.9 Jul-93 11713.3 11823.8 Aug-93 11912 12011.3 Sep-93 11901.7 12061.2 Oct-93 11939.3 12093.4 Nov-93 11903.3 12026 Dec-93 11926.3 12081.1 Jan-94 12117.8 12215.2 Feb-94 11910.1 12034.6 Mar-94 11640.6 11836 Apr-94 11494.6 11755.5 May-94 11441.8 11763.3 Jun-94 11434.4 11765 Jul-94 11635.3 11934.3 Aug-94 11648.2 11971.6 Sep-94 11396.7 11861.5 Oct-94 11405.8 11859.9 Nov-94 11369.8 11806 Dec-94 11421.2 11847.8 Jan-95 11608.4 12047.5 Feb-95 11841.2 12297.4 Mar-95 11910.4 12367.8 Apr-95 12070.8 12520.4 May-95 12550.1 12899 Jun-95 12643 12985.4 Jul-95 12573.3 12987.2 Aug-95 12703.9 13105.5 Sep-95 12843.2 13200.4 Oct-95 13022.2 13347.5 Nov-95 13167.2 13522.9 Dec-95 13271.5 13664.6 Jan-96 13387.2 13782.5 Feb-96 13239 13620.7 Mar-96 13151.7 13550.5 Apr-96 13119.8 13502.6 May-96 13108.1 13492.4 Jun-96 13222.8 13635.8 Jul-96 13262.5 13676.3 Aug-96 13303.6 13687.1 Sep-96 13504.5 13877.8 Oct-96 13713 14123 Nov-96 13916.3 14309.2 Dec-96 13850.6 14217.5 Jan-97 13949.5 14272.8 Feb-97 13984.3 14300.1 Mar-97 13876.2 14201.4 Apr-97 14048.2 14368.2 May-97 14187.4 14487.5 Jun-97 14318.8 14619.8 Jul-97 14578.1 14917.2 Aug-97 14531.8 14842.2 Sep-97 14717.4 15014.8 Oct-97 14865.8 15181.1 Nov-97 14894.5 15214.6 Dec-97 15036.6 15336.3 Jan-98 15228 15537.2 Feb-98 15223.1 15525.3 Mar-98 15233.2 15575.1 Apr-98 15303.5 15653.3 May-98 15404.7 15768 Jun-98 15504.8 15868.8 Jul-98 15543.6 15924.6 Aug-98 15627.5 16174.6 Sep-98 15869.8 16580.6 Oct-98 15719 16564.2 Nov-98 15807 16562.9 Dec-98 15905 16629.2 Jan-99 16025.9 16720.5 Feb-99 15745.4 16474.7 Mar-99 15884 16597.7 Apr-99 15942 16648.7 May-99 15787.3 16520.5 Jun-99 15762.1 16532.7 Jul-99 15721.1 16517.3 Aug-99 15704.5 16530.5 Sep-99 15827.7 16684.3 Oct-99 15821.4 16727.7 Nov-99 15856.2 16748.4 Dec-99 15833.1 16693.5 Jan-00 15739 16632.5 Feb-00 15870.4 16769.5 Mar-00 15951.4 16944.6 Apr-00 15933.8 16905.6 May-00 15917.4 16932.7 Jun-00 16214 17231.4 Jul-00 16318.6 17362.5 Aug-00 16429.5 17567.7 Sep-00 16536.6 17727.5 Oct-00 16574 17808.3 Nov-00 16738.1 18050.2 Dec-00 17024.8 18382.8 PAST PERFORMANCE IS NOT INDICATIVE, NOR A GUARANTEE, OF FUTURE RESULTS. 12 ================================================================================ THE LAZARD FUNDS, INC. GROWTH CHARTS (CONTINUED) -------------------------------------------------------------------------------- LAZARD HIGH YIELD PORTFOLIO Lazard High Yield Portfolio seeks maximum total return from a combination of capital appreciation and current income. The Portfolio invests primarily in high-yielding U.S. corporate fixed-income securities rated, at the time of purchase, below investment grade ("junk bonds"). COMPARISON OF $10,000 INVESTMENT IN THE INSTITUTIONAL SHARES OF LAZARD HIGH YIELD PORTFOLIO AND MERRILL LYNCH HIGH YIELD MASTER II INDEX [Data below represents line chart in the printed piece] MERRILL LYNCH LAZARD HIGH YIELD HIGH YIELD PORTFOLIO MASTER II INDEX ----------------- ---------------- 1/2/98 10000 10000 Jan-98 10222.3 10159.4 Feb-98 10473.7 10200.5 Mar-98 10715.9 10297.5 Apr-98 10848 10341.6 May-98 10849.7 10403.8 Jun-98 10879 10457.6 Jul-98 10969.3 10524.2 Aug-98 10353.9 9992.92 Sep-98 10147.8 10018.9 Oct-98 9801.8 9805 Nov-98 10227.2 10313.7 Dec-98 10290 10295.2 Jan-99 10421.1 10434.1 Feb-99 10484 10363.2 Mar-99 10604.1 10483.6 Apr-99 10774.3 10675.4 May-99 10661.8 10577.7 Jun-99 10652.2 10551.6 Jul-99 10624.5 10565.3 Aug-99 10448.2 10453.3 Sep-99 10377.1 10411.5 Oct-99 10311.4 10355.3 Nov-99 10522.8 10490.2 Dec-99 10592.8 10553.6 Jan-00 10550 10513.2 Feb-00 10593.2 10535.7 Mar-00 10370.8 10381 Apr-00 10273.3 10381.1 May-00 10122.8 10250.6 Jun-00 10234.2 10448.8 Jul-00 10259.4 10505 Aug-00 10224.5 10608.1 Sep-00 9988.37 10516.4 Oct-00 9444 10181.4 Nov-00 8848.08 9790.97 Dec-00 8984.34 10013.8 LAZARD INTERNATIONAL FIXED-INCOME PORTFOLIO Lazard International Fixed-Income Portfolio seeks maximum total return from a combination of capital appreciation and current income. The Portfolio invests primarily in non-U.S. fixed-income securities of varying maturities. The Portfolio typically invests more than half of its total assets in corporate bonds, mortgage-related securities, asset-backed securities and zero coupon securities, and typically invests less than half of its total assets in foreign government obligations. COMPARISON OF $10,000 INVESTMENT IN THE INSTITUTIONAL SHARES OF LAZARD INTERNATIONAL FIXED-INCOME PORTFOLIO AND SALOMON WORLD GOVERNMENT BOND INDEX EX-US [Data below represents line chart in the printed piece] LAZARD SALOMON INTERNATIONAL WORLD FIXED-INCOME GOVERNMENT PORTFOLIO BOND INDEX EX-US -------------- ---------------- 11/8/91 10000 10000 Nov-91 10036.5 10156 Dec-91 10394.5 10684.1 Jan-92 10093 10495 Feb-92 10106.3 10436.2 Mar-92 9966.71 10325.6 Apr-92 10027.9 10398.9 May-92 10311.9 10718.2 Jun-92 10507 11018.3 Jul-92 10664.4 11275 Aug-92 10974.1 11590.7 Sep-92 10958.8 11706.6 Oct-92 10712.3 11388.2 Nov-92 10536 11207.1 Dec-92 10606 11274.4 Jan-93 10780.4 11428.8 Feb-93 10985.4 11656.2 Mar-93 11184.5 11945.3 Apr-93 11550.9 12303.7 May-93 11746.6 12527.6 Jun-93 11625.3 12293.3 Jul-93 11657.8 12302 Aug-93 12045.5 12739.9 Sep-93 12228.8 12955.2 Oct-93 12212.1 12895.6 Nov-93 12132.2 12836.3 Dec-93 12267.5 12978.8 Jan-94 12353.8 13034.6 Feb-94 12323.5 13071.1 Mar-94 12412.5 13230.5 Apr-94 12389.6 13316.5 May-94 12309.3 13136.8 Jun-94 12613.8 13454.7 Jul-94 12603.2 13489.7 Aug-94 12505.1 13411.4 Sep-94 12749 13677 Oct-94 13068.7 14029.8 Nov-94 12838.6 13747.8 Dec-94 12779.1 13754.7 Jan-95 12966.2 14054.6 Feb-95 13374.6 14452.3 Mar-95 14465.5 15740.2 Apr-95 14872.2 16077.1 May-95 15226.3 16428.3 Jun-95 15311.4 16509.9 Jul-95 15316 16597.4 Aug-95 14508.6 15648.4 Sep-95 14894.1 16110 Oct-95 14998.8 16161.5 Nov-95 15108.8 16302.9 Dec-95 15255.6 16444.6 Jan-96 14986.2 16081.1 Feb-96 15010.8 16127.2 Mar-96 15014.5 16166.9 Apr-96 15035.6 16134.6 May-96 15090.4 16143.4 Jun-96 15176.3 16233.8 Jul-96 15569.4 16681.9 Aug-96 15659.8 16793.7 Sep-96 15684.6 16761.7 Oct-96 15935.7 17045 Nov-96 16132.2 17240.3 Dec-96 16097.2 17118.3 Jan-97 15456.4 16422.6 Feb-97 15337.2 16232.1 Mar-97 15190.8 16128.2 Apr-97 14886.4 15800.8 May-97 15387 16382.3 Jun-97 15580.3 16583.8 Jul-97 15203.8 16151 Aug-97 15175 16223.6 Sep-97 15550 16617.9 Oct-97 15729 16990.1 Nov-97 15405.9 16555.2 Dec-97 15199.7 16387.9 Jan-98 15267.3 16499.4 Feb-98 15514.2 16732 Mar-98 15269.2 16456 Apr-98 15603.6 16818 May-98 15492 16791.1 Jun-98 15459.4 16730.6 Jul-98 15507.4 16750.7 Aug-98 15443.8 17209.7 Sep-98 16339.5 18338.6 Oct-98 16949 19165.7 Nov-98 16740.5 18775.2 Dec-98 17205.9 19304 Jan-99 17076.9 19001.1 Feb-99 16482.8 18334.8 Mar-99 16530.6 18370 Apr-99 16514.2 18342.3 May-99 16192.2 17972.6 Jun-99 15853.3 17544.8 Jul-99 16370.1 18160.6 Aug-99 16441.6 18276.9 Sep-99 16703.1 18617.5 Oct-99 16751.5 18597.1 Nov-99 16572.3 18342.3 Dec-99 16703.5 18324.7 Jan-00 16047.1 17772.6 Feb-00 15849.7 17495.8 Mar-00 16342.6 18111.7 Apr-00 15619.4 17320.2 May-00 15783.5 17496.8 Jun-00 16129.6 17967.6 Jul-00 15783.6 17485.2 Aug-00 15535.8 17208.8 Sep-00 15469.8 17156.2 Oct-00 15072.5 16794.3 Nov-00 15288 17123.4 Dec-00 15917.9 17842.4 PAST PERFORMANCE IS NOT INDICATIVE, NOR A GUARANTEE, OF FUTURE RESULTS. 13 ================================================================================ THE LAZARD FUNDS, INC. GROWTH CHARTS (CONCLUDED) -------------------------------------------------------------------------------- LAZARD STRATEGIC YIELD PORTFOLIO Lazard Strategic Yield Portfolio seeks total return from a combination of capital appreciation and current income. The Portfolio invests primarily in a wide variety of U.S. and non-U.S. fixed-income securities. The Portfolio typically invests approximately half of its total assets in investment grade corporate bonds, mortgage-related securities and asset-backed securities. The Portfolio typically invests the other half of its total assets in fixed-income securities rated below investment grade ("junk bonds"), emerging markets securities, structured notes, and local currency-denominated bonds. COMPARISON OF $10,000 INVESTMENT IN THE INSTITUTIONAL SHARES OF LAZARD STRATEGIC YIELD PORTFOLIO AND ONE MONTH LONDON INTERBANK OFFERED RATE (LIBOR) USD FIXED INDEX [Data below represents line chart in the printed piece] ONE MONTH LAZARD LIBOR STRATEGIC YIELD USD FIXED PORTFOLIO INDEX --------------- ----------- 10/1/91 10000 10000 Oct-91 10359.8 10041.8 Nov-91 10493.2 10084.2 Dec-91 10212.9 10119.7 Jan-92 10133.8 10154.3 Feb-92 10298.7 10189.6 Mar-92 10421.4 10225 Apr-92 10420.1 10257.9 May-92 10536.4 10291.5 Jun-92 10640.3 10324.6 Jul-92 10841.5 10353.1 Aug-92 10955.8 10382.7 Sep-92 11071.3 10409.8 Oct-92 10596.5 10437.6 Nov-92 10594 10473.9 Dec-92 10821.1 10502.3 Jan-93 11106.5 10529.2 Feb-93 11322.2 10556.8 Mar-93 11506 10584.3 Apr-93 11516.1 10611.5 May-93 11617.2 10639.8 Jun-93 11928 10667.6 Jul-93 12086 10695.4 Aug-93 12184.6 10723.4 Sep-93 12172.4 10751.5 Oct-93 12354.4 10779.6 Nov-93 12391.5 10811.1 Dec-93 12508.8 10840 Jan-94 12759.9 10867.8 Feb-94 12574.3 10899.6 Mar-94 12322 10932.5 Apr-94 12151.3 10968.3 May-94 12146.9 11007.6 Jun-94 12057 11048.5 Jul-94 12191.7 11089.2 Aug-94 12357.7 11133.3 Sep-94 12288.5 11179.1 Oct-94 12258.5 11225.2 Nov-94 12315.9 11280.3 Dec-94 12216.5 11335.2 Jan-95 12206.5 11391.2 Feb-95 12267.8 11447.8 Mar-95 12329.6 11504.7 Apr-95 12613.8 11561.3 May-95 12959.5 11618.1 Jun-95 13033.5 11675.8 Jul-95 13135.4 11731.6 Aug-95 13276.8 11787.6 Sep-95 13399.8 11843.8 Oct-95 13492.7 11899.9 Nov-95 13663.8 11957.6 Dec-95 13873.3 12012.9 Jan-96 14155.6 12066 Feb-96 14102.5 12118.2 Mar-96 14205.9 12171.8 Apr-96 14340.3 12225 May-96 14478.1 12279.1 Jun-96 14643 12333.7 Jul-96 14732.3 12388.2 Aug-96 14891.4 12443 Sep-96 15216.8 12498 Oct-96 15387 12552.7 Nov-96 15619.5 12609.4 Dec-96 15780.6 12665.8 Jan-97 15977.2 12721.8 Feb-97 16135.3 12778 Mar-97 16052.2 12837.1 Apr-97 16140.6 12896.4 May-97 16338.9 12956 Jun-97 16499.2 13015.8 Jul-97 16611.4 13075.3 Aug-97 16526.9 13135.4 Sep-97 16702.1 13195.8 Oct-97 16487.4 13256.1 Nov-97 16582.4 13320.3 Dec-97 16618.3 13382.2 Jan-98 16761.2 13443.4 Feb-98 16926.1 13505.5 Mar-98 17145.9 13567.9 Apr-98 17241.6 13630.2 May-98 17234.2 13692.9 Jun-98 17199.7 13755.8 Jul-98 17423.3 13819 Aug-98 16550.4 13882.5 Sep-98 16550.4 13942.9 Oct-98 16326.3 14002.5 Nov-98 16644.7 14066.5 Dec-98 16742.1 14124.4 Jan-99 16901.1 14181.2 Feb-99 16942.3 14238.3 Mar-99 17112.6 14295.6 Apr-99 17341.1 14352.6 May-99 17191.9 14410.3 Jun-99 17301.4 14469.4 Jul-99 17249.5 14530.2 Aug-99 17160.7 14593.7 Sep-99 17122.1 14657.9 Oct-99 17179.3 14722.6 Nov-99 17371.3 14799.8 Dec-99 17564.2 14869.9 Jan-00 17550.1 14940.8 Feb-00 17723.8 15011.6 Mar-00 17760.4 15086.7 Apr-00 17738.3 15162.4 May-00 17645.4 15244 Jun-00 17791.3 15325.6 Jul-00 17956.8 15407.6 Aug-00 18021.4 15490 Sep-00 17913.3 15573 Oct-00 17744.2 15656.5 Nov-00 17589.8 15742.9 Dec-00 17760.8 15826.5 PAST PERFORMANCE IS NOT INDICATIVE, NOR A GUARANTEE, OF FUTURE RESULTS. 14 ================================================================================ THE LAZARD FUNDS, INC. PERFORMANCE TABLES -------------------------------------------------------------------------------- THE PERFORMANCE DATA CONTAINED IN THE PERFORMANCE TABLES IS NOT AUTHORIZED FOR DISTRIBUTION TO PROSPECTIVE INVESTORS IN A PORTFOLIO UNLESS PRECEDED OR ACCOMPANIED BY AN EFFECTIVE PROSPECTUS.
AVERAGE ANNUAL TOTAL RETURNS FOR PERIODS ENDED DECEMBER 31, 2000 ------------------------------------------------------------------------ INSTITUTIONAL SHARES ------------------------------------------------------------------------ ONE THREE FIVE TEN SINCE YEAR YEAR YEAR YEAR INCEPTION* ------------- ------------ ----------- ----------- ------------- Lazard Equity Portfolio (2.64)% 5.98% 12.30% 15.10% 12.76% S&P 500(Reg. TM) Index** (9.11)% 12.25% 18.32% 17.46% 14.71% S&P/BARRA Value(Reg. TM) Index** 6.08% 11.10% 16.81% 16.88% 14.00% Russell 1000(Reg. TM) Value Index** 7.01% 9.93% 16.91% 17.37% 14.27% Lazard Mid Cap Portfolio 22.44% 9.83% -- -- 10.26% Russell Midcap(Reg. TM) Index** 8.25% 12.11% -- -- 12.55% Russell Midcap Value Index** 19.18% 7.75% -- -- 9.20% Lazard Small Cap Portfolio 15.89% 1.01% 10.34% -- 14.43% Russell 2000(Reg. TM) Index** (3.02)% 4.65% 10.31% -- 12.68% Russell 2000 Value Index** 22.83% 4.22% 12.60% -- 15.21% Lazard Global Equity Portfolio (9.51)% 7.25% -- -- 10.50% MSCI(Reg. TM) World Index** (13.18)% 10.49% -- -- 11.99% Lazard International Equity Portfolio (10.55)% 8.80% 10.74% -- 9.95% MSCI EAFE(Reg. TM) Index** (14.16)% 9.36% 7.14% -- 7.71% Lazard International Small Cap Portfolio (4.44)% 9.02% 8.48% -- 6.74% MSCI EAFE Small Cap Index** (9.23)% 4.04% (3.25)% -- (0.34)% Lazard Emerging Markets Portfolio (29.53)% (5.65)% (1.31)% -- (2.15)% MSCI Emerging Markets (Free) Index** (30.61)% (4.83)% (4.17)% -- (4.00)% Lazard Bond Portfolio 7.53% 4.23% 5.11% -- 5.97% Lehman Intermediate Gov't/Corp Bond Index** 10.12% 6.23% 6.11% -- 6.87% Lazard High Yield Portfolio (15.19)% -- -- -- (3.51)% Merrill Lynch High Yield Master II Index** (5.12)% -- -- -- 0.05% Lazard International Fixed-Income Portfolio+ (4.70)% 1.55% 0.85% -- 5.20% Salomon World Government Bond Index Ex-US+** (2.63)% 2.87% 1.65% -- 6.52% Lazard Strategic Yield Portfolio 1.12% 2.24% 5.06% -- 6.41% One Month LIBOR USD Fixed Index** 6.43% 5.75% 5.67% -- 5.09%
NOTES TO PERFORMANCE TABLE: * Performance is measured for Lazard Equity Portfolio from: June 1, 1987--Institutional, February 5, 1997--Open; Lazard Mid Cap Portfolio from: November 4, 1997--Institutional, November 4, 1997--Open; Lazard Small Cap Portfolio from: October 30, 1991--Institutional, January 30, 1997--Open; Lazard Global Equity Portfolio from: January 4, 1996--Institutional, January 30, 1997--Open; Lazard International Equity Portfolio from: October 29, 1991--Institutional, January 23, 1997--Open; Lazard International Small Cap Portfolio from: December 1, 1993--Institutional, February 13, 1997--Open; Lazard Emerging Markets Portfolio from: July 15, 1994--Institutional, January 8, 1997--Open; Lazard Bond Portfolio from: November 12, 1991--Institutional, March 5, 1997--Open; Lazard High Yield Portfolio from: January 2, 1998--Institutional, February 24, 1998--Open; Lazard International Fixed-Income Portfolio from: November 8, 1991--Institutional, January 8, 1997--Open; Lazard Strategic Yield Portfolio from: October 1, 1991--Institutional, January 23, 1997--Open. The performance for the relevant indices are for the comparable period. Portfolio returns are net of fees and assume reinvestment of all dividends and distributions, if any. Certain expenses of a Portfolio have been waived and/or reimbursed by the Investment Manager and/or the Administrator; without such waiver/reimbursement of expenses, the Portfolio's total return would have been lower. Past performance is not indicative, nor a guarantee, of future results; the investment return and principal value of each Portfolio will fluctuate, so that an investor's shares in a Portfolio, when redeemed, may be worth more or less than their original cost. Within the longer periods illustrated there may have been short-term fluctuations, counter to the overall trend of investment results, and no single period of any length may be taken as typical of what may be expected in future periods. + Effective January 1, 1993, the Portfolio is measured by the index "excluding U.S." Performance of the index "Since Inception" is a blended return of the index "including U.S." and the index "excluding U.S." for the applicable periods. See additional footnotes on next page. 15 ================================================================================ THE LAZARD FUNDS, INC. PERFORMANCE TABLES (CONTINUED) --------------------------------------------------------------------------------
CUMULATIVE TOTAL RETURNS FOR PERIODS ENDED DECEMBER 31, 2000 ----------------------------------------------------------------------------- INSTITUTIONAL SHARES ----------------------------------------------------------------------------- ONE THREE FIVE TEN SINCE YEAR YEAR YEAR YEAR INCEPTION* ------------- ------------- ------------- ------------ -------------- Lazard Equity Portfolio (2.64)% 19.04% 78.60% 308.13% 411.36% S&P 500(Reg. TM) Index** (9.11)% 41.44% 131.94% 399.71% 545.05% S&P/BARRA Value(Reg. TM) Index** 6.08% 37.13% 117.46% 375.59% 492.86% Russell 1000(Reg. TM) Value Index** 7.01% 32.83% 118.42% 396.14% 512.38% Lazard Mid Cap Portfolio 22.44% 32.48% -- -- 36.12% Russell Midcap(Reg. TM) Index** 8.25% 40.91% -- -- 45.27% Russell Midcap Value Index** 19.18% 25.10% -- -- 32.05% Lazard Small Cap Portfolio 15.89% 3.06% 63.56% -- 244.07% Russell 2000(Reg. TM) Index** (3.02)% 14.60% 63.36% -- 198.75% Russell 2000 Value Index** 22.83% 13.19% 81.04% -- 266.21% Lazard Global Equity Portfolio (9.51)% 23.35% -- -- 64.62% MSCI(Reg. TM) World Index** (13.18)% 34.87% -- -- 76.11% Lazard International Equity Portfolio (10.55)% 28.79% 66.57% -- 138.54% MSCI EAFE(Reg. TM) Index** (14.16)% 30.77% 41.15% -- 97.47% Lazard International Small Cap Portfolio (4.44)% 29.57% 50.25% -- 58.78% MSCI EAFE Small Cap Index** (9.23)% 12.62% (15.25)% -- (2.37)% Lazard Emerging Markets Portfolio (29.53)% (16.00)% (6.37)% -- (13.11)% MSCI Emerging Markets (Free) Index** (30.61)% (13.79)% (19.18)% -- (23.33)% Lazard Bond Portfolio 7.53% 13.22% 28.28% -- 70.25% Lehman Intermediate Gov't/Corp Bond Index** 10.12% 19.87% 34.53% -- 83.83% Lazard High Yield Portfolio (15.19)% -- -- -- (10.16)% Merrill Lynch High Yield Master II Index** (5.12)% -- -- -- 0.14% Lazard International Fixed-Income Portfolio+ (4.70)% 4.73% 4.34% -- 59.18% Salomon World Government Bond Index Ex-US+** (2.63)% 8.87% 8.51% -- 78.42% Lazard Strategic Yield Portfolio 1.12% 6.88% 28.02% -- 77.61% One Month LIBOR USD Fixed Index** 6.43% 18.27% 31.75% -- 58.27%
** The performance data of the indices have been prepared from sources and data that the Investment Manager believes to be reliable, but no representation is made as to their accuracy. These indices are unmanaged and have no fees or costs. The S&P 500 Index is a market capitalization-weighted index of 500 common stocks, designed to measure performance of the broad domestic economy through changes in the aggregate market value of these stocks, which represent all major industries. The S&P/BARRA Value Index is a capitalization-weighted index of all the stocks in the S&P 500 Index that have low price-to-book ratios. The Russell 1000 Value Index measures the performance of those companies in the Russell 1000 Index (consisting of the 1,000 largest U.S. companies by capitalization) with lower price-to-book ratios and lower forecasted growth values. The Russell Midcap Index measures the performance of the 800 smallest companies in the Russell 1000 Index. The Russell Midcap Value Index measures the performance of those companies in the Russell Midcap Index with lower price-to-book ratios and lower forecasted growth values. The Russell 2000 Index is comprised of the 2,000 smallest U.S. companies included in the Russell 3000(Reg. TM) Index (consisting of the 3,000 largest U.S. companies by capitalization). The Russell 2000 Value Index measures the performance of those companies in the Russell 2000 Index with lower price-to-book ratios and lower forecasted growth values. The Morgan Stanley Capital International (MSCI) World Index represents market value-weighted average returns of selected securities listed on the stock exchanges of Europe, Australasia, the Far East ("EAFE"), New Zealand, Canada and the United States. The MSCI EAFE Index is a broadly diversified international index comprised of equity securities of approximately 1,000 companies located outside the United States. The MSCI EAFE Small Cap Index is an arithmetic, market value-weighted average of the performance of securities of small cap companies listed on the stock exchanges of EAFE Index countries. The MSCI Emerging Markets (Free) Index is comprised of emerging market securities in countries open to non-local investors. The Lehman Intermediate Gov't/Corp Bond Index is comprised of U.S. Government and corporate bonds in the intermediate maturity range calculated by Lehman Brothers. The Merrill Lynch High Yield Master II Index provides a broad-based measure of the performance of the non-investment grade U.S. domestic bond market. The Salomon World Government Bond Index Ex-US is a market capitalization-weighted index of institutionally traded fixed rate non-U.S. dollar government bonds, fully hedged into U.S. dollars. The One Month London Interbank Offered Rate (LIBOR) USD Fixed Index is an average derived from sixteen quotations of the rate that banks dealing in Eurodollars charge each other for large loans, as provided by banks determined by the British Bankers Association. 16 ================================================================================ THE LAZARD FUNDS, INC. PERFORMANCE TABLES (CONCLUDED) --------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS CUMULATIVE TOTAL RETURNS FOR PERIODS ENDED DECEMBER 31, 2000 FOR PERIODS ENDED DECEMBER 31, 2000 ---------------------------------------- ------------------------------------------- OPEN SHARES ------------------------------------------------------------------------------------ ONE THREE SINCE ONE THREE SINCE YEAR YEAR INCEPTION* YEAR YEAR INCEPTION* ------------- ------------ ------------- ------------- ------------- --------------- Lazard Equity Portfolio (2.91)% 5.68% 9.07% (2.91)% 18.02% 40.32% S&P 500(Reg. TM) Index** (9.11)% 12.25% 16.88% (9.11)% 41.44% 83.82% S&P/BARRA Value(Reg. TM) Index** 6.08% 11.10% 14.54% 6.08% 37.13% 69.88% Russell 1000(Reg. TM) Value Index** 7.01% 9.93% 14.62% 7.01% 32.83% 70.37% Lazard Mid Cap Portfolio 22.00% 9.46% 9.89% 22.00% 31.16% 34.72% Russell Midcap(Reg. TM) Index** 8.25% 12.11% 12.55% 8.25% 40.91% 45.26% Russell Midcap Value Index** 19.18% 7.75% 9.20% 19.18% 25.10% 32.10% Lazard Small Cap Portfolio 15.60% 0.73% 6.58% 15.60% 2.21% 28.37% Russell 2000(Reg. TM) Index** (3.02)% 4.65% 8.46% (3.02)% 14.60% 37.48% Russell 2000 Value Index** 22.83% 4.22% 10.32% 22.83% 13.19% 46.91% Lazard Global Equity Portfolio (9.72)% 6.97% 9.52% (9.72)% 22.41% 42.85% MSCI(Reg. TM) World Index** (13.18)% 10.49% 11.71% (13.18)% 34.87% 54.30% Lazard International Equity Portfolio (10.95)% 8.45% 9.99% (10.95)% 27.55% 45.50% MSCI EAFE(Reg. TM) Index** (14.16)% 9.36% 8.46% (14.16)% 30.77% 37.71% Lazard International Small Cap Portfolio (4.85)% 8.60% 5.69% (4.85)% 28.08% 23.93% MSCI EAFE Small Cap Index** (9.23)% 4.04% (3.49)% (9.23)% 12.62% (12.88)% Lazard Emerging Markets Portfolio (29.80)% (5.79)% (7.42)% (29.80)% (16.40)% (26.42)% MSCI Emerging Markets (Free) Index** (30.61)% (4.83)% (6.87)% (30.61)% (13.79)% (24.68)% Lazard Bond Portfolio 7.25% 3.92% 4.95% 7.25% 12.21% 20.31% Lehman Intermediate Gov't/Corp Bond Index** 10.12% 6.23% 6.80% 10.12% 19.87% 28.67% Lazard High Yield Portfolio (15.54)% -- (5.62)% (15.54)% -- (15.22)% Merrill Lynch High Yield Master II Index** (5.12)% -- (0.68)% (5.12)% -- (1.93)% Lazard International Fixed-Income Portfolio (4.92)% 1.29% (0.27)% (4.92)% 3.91% (1.08)% Salomon World Government Bond Index Ex-US** (2.63)% 2.87% 1.05% (2.63)% 8.87% 4.23% Lazard Strategic Yield Portfolio 0.71% 1.81% 2.33% 0.71% 5.53% 9.51% One Month LIBOR USD Fixed Index** 6.43% 5.75% 5.73% 6.43% 18.27% 24.57%
17 ================================================================================ THE LAZARD FUNDS, INC. PORTFOLIO OF INVESTMENTS DECEMBER 31, 2000 -------------------------------------------------------------------------------- DESCRIPTION SHARES VALUE -------------------------------------------------------------------------------- LAZARD EQUITY PORTFOLIO COMMON STOCKS--99.3% AEROSPACE & DEFENSE--2.4% Raytheon Co., Class B ......................... 24,900 $ 773,456 United Technologies Corp. ..................... 66,700 5,244,288 ----------- 6,017,744 ----------- ALUMINUM--1.1% Alcoa, Inc. ................................... 83,200 2,787,200 ----------- AUTOMOTIVE--1.6% Ford Motor Co. ................................ 97,551 2,286,352 General Motors Corp. .......................... 34,446 1,754,593 ----------- 4,040,945 ----------- BANKING & FINANCIAL SERVICES--18.6% Bank of America Corp. ......................... 118,150 5,420,131 Chase Manhattan Corp. ......................... 165,336 7,512,454 Citigroup, Inc. ............................... 206,297 10,534,041 Fannie Mae .................................... 38,000 3,296,500 FleetBoston Financial Corp. ................... 103,400 3,883,963 Mellon Financial Corp. ........................ 79,600 3,915,325 Morgan Stanley Dean Witter & Co. .............. 48,600 3,851,550 PNC Financial Services Group .................. 18,000 1,315,125 Wells Fargo & Co. ............................. 121,700 6,777,169 ----------- 46,506,258 ----------- BREWERY--1.6% Anheuser-Busch Cos., Inc. ..................... 87,600 3,985,800 ----------- BROADCASTING--1.1% Comcast Corp., Class A (a) .................... 64,500 2,692,875 ----------- BUSINESS SERVICES & SUPPLIES--1.6% First Data Corp. .............................. 77,600 4,088,550 ----------- CHEMICALS & PLASTICS--0.7% Du Pont (E.I.) de Nemours & Co. ............... 36,400 1,758,575 ----------- COMPUTER SOFTWARE--2.4% Microsoft Corp. (a) ........................... 140,400 6,089,850 ----------- COMPUTERS & BUSINESS EQUIPMENT--4.5% Compaq Computer Corp. ......................... 262,400 3,949,120 International Business Machines Corp ......................................... 84,600 7,191,000 ----------- 11,140,120 ----------- CONGLOMERATES--1.0% Textron, Inc. ................................. 52,500 2,441,250 ----------- DIVERSIFIED--4.5% Minnesota Mining & Manufacturing Co. ............................ 26,900 3,241,450 PPG Industries, Inc. .......................... 56,100 2,598,131 Tyco International, Ltd. ...................... 95,200 5,283,600 ----------- 11,123,181 ----------- DRUGS & HEALTH CARE--10.9% American Home Products Corp. .................. 107,800 6,850,690 Baxter International, Inc. .................... 45,600 4,027,050 Bristol-Myers Squibb Co. ...................... 61,300 4,532,369 Merck & Co., Inc. ............................. 72,300 6,769,087 Schering-Plough Corp. ......................... 88,600 5,028,050 ----------- 27,207,246 ----------- ELECTRONICS--1.0% Motorola, Inc. ................................ 42,400 858,600 Texas Instruments, Inc. ....................... 32,800 1,553,900 ----------- 2,412,500 ----------- FOOD & BEVERAGES--3.3% H.J. Heinz Co. ................................ 74,600 3,538,837 PepsiCo, Inc. ................................. 88,700 4,396,194 The Quaker Oats Co. ........................... 2,800 272,650 ----------- 8,207,681 ----------- HOTELS & RESTAURANTS--1.1% McDonald's Corp. .............................. 77,900 2,648,600 ----------- HOUSEHOLD PRODUCTS--1.3% The Procter & Gamble Co. ...................... 41,900 3,286,531 ----------- INSURANCE--5.7% Allstate Corp. ................................ 108,198 4,713,375 Axa ADR ....................................... 10,473 752,057 MetLife, Inc. ................................. 88,900 3,111,500 The Hartford Financial Services Group, Inc. .................................. 78,800 5,565,250 ----------- 14,142,182 ----------- MACHINERY--0.3% Deere & Co. ................................... 16,200 742,163 ----------- MULTIMEDIA--2.6% Gannett Co., Inc. ............................. 39,800 2,509,887 Time Warner, Inc. ............................. 78,500 4,100,840 ----------- 6,610,727 ----------- OIL & GAS--7.5% Chevron Corp. ................................. 49,700 4,196,544 Coastal Corp. ................................. 34,600 3,055,612 Conoco, Inc., Class B ......................... 107,474 3,110,029 THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS. 18 ================================================================================ THE LAZARD FUNDS, INC. PORTFOLIO OF INVESTMENTS (CONTINUED) DECEMBER 31, 2000 -------------------------------------------------------------------------------- DESCRIPTION SHARES VALUE -------------------------------------------------------------------------------- LAZARD EQUITY PORTFOLIO (CONCLUDED) Exxon Mobil Corp. ............................. 53,364 $ 4,639,333 Texaco, Inc. .................................. 59,000 3,665,375 ----------- 18,666,893 ----------- PAPER PRODUCTS--3.2% International Paper Co. ....................... 84,100 3,432,331 Kimberly-Clark Corp. .......................... 63,612 4,496,733 ----------- 7,929,064 ----------- PETROLEUM EQUIPMENT & SERVICES--1.7% Halliburton Co. ............................... 62,800 2,276,500 Schlumberger Ltd. ............................. 26,300 2,102,356 ----------- 4,378,856 ----------- PUBLISHING--0.3% The New York Times Co. Class A ................ 18,600 745,162 ----------- RETAIL--4.7% Federated Department Stores, Inc. (a) ......... 84,700 2,964,500 Lowe's Cos., Inc. ............................. 51,400 2,287,300 Target Corp. .................................. 132,900 4,286,025 The Gap, Inc. ................................. 83,700 2,134,350 ----------- 11,672,175 ----------- SEMICONDUCTORS & COMPONENTS--2.3% Intel Corp. ................................... 192,500 5,787,031 ----------- TELECOMMUNICATIONS--10.1% AT&T Corp. .................................... 144,300 2,498,194 AT&T Wireless Group (a) ....................... 145,200 2,513,775 Avaya, Inc. (a) ............................... 1 11 Lucent Technologies, Inc. ..................... 232,200 3,134,700 Qwest Communications International, Inc. (a) ..................... 91,400 3,747,400 SBC Communications, Inc. ...................... 137,779 6,578,947 Verizon Communications, Inc. .................. 123,400 6,185,425 WorldCom, Inc. (a) ............................ 45,700 642,656 ----------- 25,301,108 ----------- TOBACCO--2.2% Philip Morris Cos., Inc. ...................... 123,400 5,429,600 ----------- TOTAL COMMON STOCKS (Identified cost $242,157,310) ................ 247,839,867 ----------- PRINCIPAL AMOUNT DESCRIPTION (000) VALUE ------- --------- REPURCHASE AGREEMENT--1.0% State Street Bank and Trust Co., 5.80%, 01/02/01, (Dated 12/29/00, collateralized by $2,625,000 United States Treasury Note, 5.875%, 09/30/02, with a value of $ 2,690,625) (Identified cost $2,634,000) ................. $2,634 2,634,000 ----------- TOTAL INVESTMENTS (Identified cost $244,791,310) (b) ............ 100.3% $250,473,867 LIABILITIES IN EXCESS OF CASH AND OTHER ASSETS .............................. (0.3) (790,282) ------ ----------- NET ASSETS ..................................... 100.0% $249,683,585 ====== ============ THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS. 19 ================================================================================ THE LAZARD FUNDS, INC. PORTFOLIO OF INVESTMENTS (CONTINUED) DECEMBER 31, 2000 -------------------------------------------------------------------------------- DESCRIPTION SHARES VALUE -------------------------------------------------------------------------------- LAZARD MID CAP PORTFOLIO COMMON STOCKS--97.9% AEROSPACE & DEFENSE--2.9% Raytheon Co., Class B ......................... 5,600 $ 173,950 The B.F. Goodrich Co. ......................... 12,400 451,050 ----------- 625,000 ----------- AUTO PARTS--1.8% Delphi Automotive Systems Corp. ............... 35,400 398,250 ----------- BANKING & FINANCIAL SERVICES--10.0% Allied Capital Corp. .......................... 7,300 152,388 Capital One Financial Corp. ................... 5,900 388,294 North Fork Bancorporation, Inc. ............... 20,950 514,584 SouthTrust Corp. .............................. 16,800 683,550 Stilwell Financial, Inc. ...................... 11,100 437,756 ----------- 2,176,572 ----------- BROADCASTING--3.2% Fox Entertainment Group, Inc., Class A (a) .................................. 17,600 314,600 USA Networks, Inc. (a) ........................ 19,000 369,313 ----------- 683,913 ----------- BUSINESS SERVICES & SUPPLIES--11.8% Acxiom Corp. (a) .............................. 10,200 397,163 Celestica, Inc. (a) ........................... 5,400 292,950 Ceridian Corp. (a) ............................ 18,300 364,856 First Data Corp. .............................. 3,900 205,481 Gartner Group, Inc., Class A (a) .............. 68,900 475,410 Gartner Group, Inc., Class B (a) .............. 11,800 74,812 Sabre Holdings Corp. .......................... 15,300 659,812 True North Communications, Inc. ............... 2,200 93,500 ----------- 2,563,984 ----------- CABLE TELEVISION--0.7% Cablevision Systems Corp., Class A (a) .................................. 1,800 152,888 ----------- CHEMICALS & PLASTICS--1.9% Eastman Chemical Co. .......................... 8,400 409,500 ----------- COMPUTER SOFTWARE--1.1% J.D. Edwards & Co. (a) ........................ 13,300 236,906 ----------- COMPUTERS & BUSINESS EQUIPMENT--6.8% Black Box Corp. (a) ........................... 3,900 188,419 Diebold, Inc. ................................. 14,300 477,262 Lexmark International, Inc. (a) ............... 5,600 248,150 Maxtor Corp. (a) .............................. 62,628 350,325 NCR Corp. (a) ................................. 4,100 201,413 ----------- 1,465,569 ----------- CONGLOMERATES--2.7% Textron, Inc. ................................. 12,600 585,900 ----------- CONTAINERS--0.8% Sealed Air Corp. (a) .......................... 5,800 176,900 ----------- DIVERSIFIED--1.6% SPX Corp. (a) ................................. 3,100 335,381 ----------- DRUGS & HEALTH CARE--4.4% Biogen, Inc. (a) .............................. 5,700 342,356 Genzyme Corp. (a) ............................. 2,200 197,863 King Pharmaceuticals, Inc. (a) ................ 8,200 423,837 ----------- 964,056 ----------- ELECTRICAL EQUIPMENT--0.7% Gentex Corp. (a) .............................. 7,700 143,413 ----------- ELECTRONICS--3.0% Conexant Systems, Inc. (a) .................... 19,100 293,662 KEMET Corp. (a) ............................... 14,700 222,338 SCI Systems, Inc. (a) ......................... 5,000 131,875 ----------- 647,875 ----------- FOOD & BEVERAGES--6.1% General Mills, Inc. ........................... 4,100 182,706 Keebler Foods Co. ............................. 6,100 252,769 The Quaker Oats Co. ........................... 3,000 292,125 Whitman Corp. (a) ............................. 36,800 602,600 ----------- 1,330,200 ----------- INSURANCE--5.1% ACE, Ltd. ..................................... 12,800 543,200 Ambac Financial Group, Inc. ................... 7,650 446,091 Everest Re Group, Ltd. ........................ 1,500 107,437 ----------- 1,096,728 ----------- OIL & GAS--12.5% Baker Hughes, Inc. ............................ 12,100 502,906 Cooper Cameron Corp. (a) ...................... 4,100 270,856 Devon Energy Corp. ............................ 7,900 481,663 The Coastal Corp. ............................. 5,200 459,225 Tidewater, Inc. ............................... 11,800 523,625 USX-Marathon Group ............................ 17,100 474,525 ----------- 2,712,800 ----------- PAPER PRODUCTS--1.7% Bowater, Inc. ................................. 6,400 360,800 ----------- PUBLISHING--0.9% The New York Times Co. Class A ................ 4,900 196,306 ----------- THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS. 20 -------------------------------------------------------------------------------- THE LAZARD FUNDS, INC. PORTFOLIO OF INVESTMENTS (CONTINUED) DECEMBER 31, 2000 -------------------------------------------------------------------------------- DESCRIPTION SHARES VALUE -------------------------------------------------------------------------------- LAZARD MID CAP PORTFOLIO (CONCLUDED) RETAIL--4.1% Blockbuster, Inc., Class A .................... 32,100 $ 268,838 Family Dollar Stores, Inc. .................... 11,100 237,956 Venator Group, Inc. (a) ....................... 25,100 389,050 ----------- 895,844 ----------- TELECOMMUNICATIONS--2.2% Harris Corp. .................................. 15,900 486,938 ----------- TOYS & AMUSEMENTS--0.8% Hasbro, Inc. .................................. 17,100 181,688 ----------- UTILITIES--11.1% Entergy Corp. ................................. 13,700 579,681 GPU, Inc. ..................................... 4,800 176,700 NiSource, Inc. ................................ 20,700 636,525 Southern Energy, Inc. (a) ..................... 18,000 509,625 UtiliCorp United, Inc. ........................ 16,500 511,500 ----------- 2,414,031 ----------- TOTAL COMMON STOCKS (Identified cost $18,799,328) ................. 21,241,442 ----------- PRINCIPAL AMOUNT DESCRIPTION (000) ------- REPURCHASE AGREEMENT--3.6% State Street Bank and Trust Co., 5.80%, 01/02/01, (Dated 12/29/00, collateralized by $760,000 United States Treasury Note, 5.50%, 02/15/08, with a value of $789,936) (Identified cost $771,000) ................... $ 771 771,000 ----------- TOTAL INVESTMENTS (Identified cost $19,570,328) (b) ............. 101.5% $22,012,442 LIABILITIES IN EXCESS OF CASH AND OTHER ASSETS .............................. (1.5) (326,546) ------ ----------- NET ASSETS ..................................... 100.0% $21,685,896 ====== =========== THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS. 21 ================================================================================ THE LAZARD FUNDS, INC. PORTFOLIO OF INVESTMENTS (CONTINUED) DECEMBER 31, 2000 -------------------------------------------------------------------------------- DESCRIPTION SHARES VALUE -------------------------------------------------------------------------------- LAZARD SMALL CAP PORTFOLIO COMMON STOCKS--96.2% AIRLINES--1.1% Alaska Air Group, Inc. (a) .................... 288,700 $ 8,588,825 ----------- APPAREL & TEXTILES--0.5% Tommy Hilfiger Corp. (a) ...................... 422,800 4,148,725 ----------- AUTO PARTS--1.9% Borg Warner, Inc. ............................. 254,800 10,192,000 Pennzoil-Quaker State Co. ..................... 397,000 5,111,375 ----------- 15,303,375 ----------- BANKING & FINANCIAL SERVICES--8.9% Allied Capital Corp. .......................... 383,000 7,995,125 Chittenden Corp. .............................. 226,000 6,850,625 Cullen/Frost Bankers, Inc. .................... 163,600 6,840,525 DLJdirect (a) ................................. 649,500 2,435,625 Heller Financial, Inc. ........................ 339,900 10,430,681 New York Community Bancorp, Inc. .............. 325,345 11,956,429 Richmond County Financial Corp. ............... 56,100 1,465,613 Southwest Bancorporation of Texas, Inc. (a) .............................. 89,100 3,825,731 Staten Island Bancorp, Inc. ................... 368,700 7,880,962 Westamerica Bancorporation .................... 110,700 4,760,100 Wilmington Trust Corp. ........................ 103,600 6,429,675 ----------- 70,871,091 ----------- BROADCASTING--0.1% Classic Communications, Inc., Class A (a) .................................. 318,200 696,063 ----------- BUILDING & CONSTRUCTION--1.2% Granite Construction, Inc. .................... 140,700 4,071,506 Insituform Technologies, Inc., Class A (a) .................................. 146,700 5,849,663 ----------- 9,921,169 ----------- BUSINESS SERVICES & SUPPLIES--13.1% ACNielsen Corp. (a) ........................... 408,500 14,808,125 Acxiom Corp. (a) .............................. 398,700 15,524,381 Affiliated Computer Services, Inc., Class A (a) .................................. 62,400 3,786,900 American Management Systems, Inc. (a) ..................................... 375,900 7,447,519 CDI Corp. (a) ................................. 299,000 4,372,875 ChoicePoint, Inc. (a) ......................... 72,100 4,727,056 Gartner Group, Inc., Class A (a) .............. 923,200 6,370,080 MAXIMUS, Inc. (a) ............................. 227,300 7,941,294 National Data Corp. ........................... 236,100 8,647,162 Spherion Corp. (a) ............................ 200,200 2,264,763 Tetra Tech, Inc. (a) .......................... 165,700 5,281,687 The Profit Recovery Group International, Inc. (a) ...................... 487,300 3,106,538 The Titan Corp. (a) ........................... 419,500 6,816,875 True North Communications, Inc. ............... 31,100 1,321,750 United Stationers, Inc. (a) ................... 265,500 6,372,000 West TeleServices Corp. (a) ................... 217,500 6,117,187 ----------- 104,906,192 ----------- CHEMICALS & PLASTICS--0.6% Ferro Corp. ................................... 224,200 5,156,600 ----------- COMPUTER SERVICES--1.4% Answerthink, Inc. (a) ......................... 915,800 3,319,775 Dendrite International, Inc. (a) .............. 346,000 7,741,750 ----------- 11,061,525 ----------- COMPUTER SOFTWARE--3.9% Avant! Corp. (a) .............................. 398,200 7,292,037 J.D. Edwards & Co. (a) ........................ 250,800 4,467,375 Mentor Graphics Corp. (a) ..................... 562,300 15,428,106 Transaction Systems Architects, Inc., Class A (a) .................................. 339,500 3,925,469 ----------- 31,112,987 ----------- COMPUTERS & BUSINESS EQUIPMENT--5.5% Avocent Corp. (a) ............................. 238,200 6,431,400 Black Box Corp. (a) ........................... 207,500 10,024,844 Computer Network Technology Corp. (a) .................................... 158,200 4,558,137 Diebold, Inc. ................................. 230,000 7,676,250 Maxtor Corp. (a) .............................. 993,500 5,557,390 Micron Electronics, Inc. (a) .................. 100,900 394,141 RadiSys Corp. (a) ............................. 249,400 6,453,225 Storage Technology Corp. (a) .................. 332,100 2,988,900 ----------- 44,084,287 ----------- CONTAINERS--1.2% Packaging Corp. of America (a) ................ 573,400 9,246,075 ----------- DRUGS & HEALTH CARE--2.0% Apria Healthcare Group, Inc. (a) .............. 189,700 5,643,575 Manor Care, Inc. (a) .......................... 418,300 8,627,438 Owens & Minor, Inc. ........................... 104,500 1,854,875 ----------- 16,125,888 ----------- EDUCATION--1.1% ITT Educational Services, Inc. (a) ............ 381,100 8,384,200 ----------- ELECTRICAL EQUIPMENT--1.6% Anixter International, Inc. (a) ............... 191,200 4,134,700 THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS. 22 ================================================================================ THE LAZARD FUNDS, INC. PORTFOLIO OF INVESTMENTS (CONTINUED) DECEMBER 31, 2000 -------------------------------------------------------------------------------- DESCRIPTION SHARES VALUE -------------------------------------------------------------------------------- LAZARD SMALL CAP PORTFOLIO (CONTINUED) Belden, Inc. .................................. 190,620 $ 4,836,982 Gentex Corp. (a) .............................. 211,900 3,946,638 ----------- 12,918,320 ----------- ELECTRONICS--3.7% AMETEK, Inc. .................................. 438,600 11,376,187 KEMET Corp. (a) ............................... 195,200 2,952,400 Sensormatic Electronics Corp. (a) ............. 618,700 12,412,669 Viasystems Group, Inc. (a) .................... 361,200 3,002,475 ----------- 29,743,731 ----------- FOOD & BEVERAGES--1.6% Whitman Corp. (a) ............................. 772,600 12,651,325 ----------- GAS EXPLORATION--2.6% Barrett Resources Corp. (a) ................... 186,700 10,606,894 Louis Dreyfus Natural Gas Corp. (a) ........... 218,100 9,991,706 ----------- 20,598,600 ----------- HOMEBUILDERS--1.4% Kaufman & Broad Home Corp. .................... 103,900 3,500,131 Toll Brothers, Inc. (a) ....................... 185,200 7,570,050 ----------- 11,070,181 ----------- HOTELS & RESTAURANTS--1.4% Morton's Restaurant Group, Inc. (a) ........... 259,300 5,510,125 Prime Hospitality Corp. (a) ................... 456,500 5,306,813 ----------- 10,816,938 ----------- HOUSEHOLD APPLIANCES & HOME FURNISHINGS--3.3% Ethan Allen Interiors, Inc. ................... 82,800 2,773,800 Furniture Brands International, Inc. (a) ...... 694,000 14,617,375 Harman International Industries, Inc. ......... 242,300 8,843,950 ----------- 26,235,125 ----------- INDUSTRIAL & MACHINERY--2.1% JLG Industries, Inc. .......................... 501,900 5,332,687 Regal-Beloit Corp. ............................ 77,200 1,317,032 Roper Industries, Inc. ........................ 160,300 5,299,919 Snap-on, Inc. ................................. 173,200 4,827,950 ----------- 16,777,588 ----------- INSURANCE--4.6% AmerUs Group Co. .............................. 100,100 3,240,738 Arthur J. Gallagher & Co. ..................... 120,600 7,673,175 Everest Re Group, Ltd. ........................ 202,500 14,504,062 Radian Group, Inc. ............................ 149,471 11,219,667 ----------- 36,637,642 ----------- LEISURE & ENTERTAINMENT--0.6% Bally Total Fitness Holding Corp. (a) ......... 138,000 4,674,750 ----------- MANUFACTURING--1.1% Crane Co. ..................................... 116,510 3,313,253 Federal Signal Corp. .......................... 283,600 5,565,650 ----------- 8,878,903 ----------- MEDICAL PRODUCTS--4.6% INAMED Corp. (a) .............................. 309,700 6,329,494 Invacare Corp. ................................ 530,900 18,183,325 STERIS Corp. (a) .............................. 497,800 8,027,025 Varian Medical Systems, Inc. (a) .............. 64,300 4,368,381 ----------- 36,908,225 ----------- MEDICAL SERVICES--1.0% Renal Care Group, Inc. (a) .................... 302,100 8,284,148 ----------- MEDICAL SUPPLIES--1.5% DENTSPLY International, Inc. .................. 296,900 11,616,213 ----------- MULTIMEDIA--0.4% The Ackerley Group, Inc. ...................... 349,500 3,145,500 ----------- OIL & GAS--2.6% Chiles Offshore, Inc. (a) ..................... 301,300 7,532,500 Helmerich & Payne, Inc. ....................... 293,920 12,895,740 ----------- 20,428,240 ----------- PUBLISHING--4.2% Banta Corp. ................................... 328,850 8,359,367 Houghton Mifflin Co. .......................... 160,400 7,438,550 Pulitzer, Inc. ................................ 161,700 7,575,645 R. H. Donnelley Corp. (a) ..................... 424,600 10,323,087 ----------- 33,696,649 ----------- REAL ESTATE--2.8% Alexandria Real Estate Equities, Inc. ......... 71,100 2,644,031 Chelsea GCA Realty, Inc. ...................... 101,000 3,724,375 FelCor Lodging Trust, Inc. .................... 234,825 5,621,124 Kilroy Realty Corp. ........................... 145,600 4,085,900 Reckson Associates Realty Corp. ............... 259,200 6,496,200 ----------- 22,571,630 ----------- RETAIL--5.1% AnnTaylor Stores Corp. (a) .................... 128,900 3,214,444 Blockbuster, Inc., Class A .................... 667,800 5,592,825 Borders Group, Inc. (a) ....................... 732,300 8,558,756 Hughes Supply, Inc. ........................... 278,600 4,998,084 Pier 1 Imports, Inc. .......................... 124,500 1,283,906 Ross Stores, Inc. ............................. 166,600 2,811,375 Venator Group, Inc. (a) ....................... 880,400 13,646,200 ----------- 40,105,590 ----------- THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS. 23 ================================================================================ THE LAZARD FUNDS, INC. PORTFOLIO OF INVESTMENTS (CONTINUED) DECEMBER 31, 2000 -------------------------------------------------------------------------------- DESCRIPTION SHARES VALUE -------------------------------------------------------------------------------- LAZARD SMALL CAP PORTFOLIO (CONCLUDED) TELECOMMUNICATIONS EQUIPMENT--1.8% Allen Telecom, Inc. (a) ....................... 258,465 $ 4,636,216 ANTEC Corp. (a) ............................... 566,500 4,478,891 CommScope, Inc. (a) ........................... 332,100 5,500,406 ----------- 14,615,513 ----------- TOYS & AMUSEMENTS--1.0% Hasbro, Inc. .................................. 735,900 7,818,938 ----------- TRANSPORTATION--2.7% CNF, Inc. ..................................... 294,600 9,961,163 Landstar System, Inc. (a) ..................... 212,000 11,752,750 ----------- 21,713,913 ----------- UTILITIES--2.0% Avista Corp. .................................. 171,300 3,511,650 Orion Power Holdings, Inc. (a) ................ 268,000 6,599,500 Sierra Pacific Resources ...................... 353,792 5,682,784 ----------- 15,793,934 ----------- TOTAL COMMON STOCKS (Identified cost $686,114,785) ................ 767,308,598 ----------- PRINCIPAL AMOUNT DESCRIPTION (000) ------- CONVERTIBLE BONDS--0.0% RESTAURANTS, LODGING & ENTERTAINMENT--0.0% Interactive Light Holdings, Inc., 10.00%, 02/07/01 (Identified cost $1,000,000) (a), (c) ........ $ 1,000 0 ----------- REPURCHASE AGREEMENT--4.3% State Street Bank and Trust Co., 5.80%, 01/02/01, (Dated 12/29/00, collateralized by $9,360,000 United States Treasury Note, 5.50%, 01/31/03, with a value of $9,629,000 and $23,450,000 United States Treasury Note, 6.875%, 05/15/06, with a value of $25,501,875) (Identified cost $34,439,000) ................ 34,439 34,439,000 ------------ TOTAL INVESTMENTS (Identified cost $721,553,785) (b) ............ 100.5% $801,747,598 LIABILITIES IN EXCESS OF CASH AND OTHER ASSETS .............................. (0.5) (3,851,912) ----- ------------ NET ASSETS ..................................... 100.0% $797,895,686 ===== ============ THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS. 24 =============================================================================== THE LAZARD FUNDS, INC. PORTFOLIO OF INVESTMENTS (CONTINUED) DECEMBER 31, 2000 -------------------------------------------------------------------------------- DESCRIPTION SHARES VALUE -------------------------------------------------------------------------------- LAZARD GLOBAL EQUITY PORTFOLIO COMMON STOCKS--98.1% AUSTRALIA--1.0% BHP, Ltd. ..................................... 107,441 $ 1,133,091 ----------- DENMARK--0.8% Tele Danmark A/S .............................. 22,300 909,660 ----------- FINLAND--0.9% UPM-Kymmene Oyj ............................... 29,300 1,005,589 ----------- FRANCE--8.8% Alcatel SA .................................... 13,600 772,609 Aventis SA .................................... 24,575 2,157,599 Axa ........................................... 11,470 1,658,630 BNP Paribas SA ................................ 16,140 1,417,035 Compagnie de Saint-Gobain ..................... 4,600 722,635 TotalFinaElf SA ............................... 12,407 1,845,387 Vivendi Universal SA .......................... 15,245 1,003,485 ----------- TOTAL FRANCE .................................. 9,577,380 ----------- GERMANY--5.3% Allianz AG .................................... 4,660 1,744,170 Bayerische Hypo-und Vereinsbank AG ............................... 29,200 1,653,353 E.On AG ....................................... 29,700 1,807,161 ThyssenKrupp AG ............................... 40,600 629,036 ----------- TOTAL GERMANY ................................. 5,833,720 ----------- ITALY--1.3% San Paolo-IMI SpA ............................. 85,600 1,384,116 ----------- JAPAN--11.0% Canon, Inc. ................................... 28,000 979,706 Fujitsu, Ltd. ................................. 62,000 913,296 Kao Corp. ..................................... 43,000 1,248,775 Mizuho Holdings, Inc. ......................... 224 1,387,264 Nippon Telegraph & Telephone Corp. ............ 62 446,344 Nissan Motor Co., Ltd. (a) .................... 233,000 1,341,095 NTT DoCoMo, Inc. .............................. 38 654,828 Sankyo Co., Ltd. .............................. 37,000 886,809 Sony Corp. .................................... 16,300 1,126,400 TDK Corp. ..................................... 8,100 787,894 The Sakura Bank, Ltd. ......................... 192,000 1,158,852 The Sumitomo Trust & Banking Co., Ltd. .................................... 157,000 1,067,084 ----------- TOTAL JAPAN ................................... 11,998,347 ----------- NETHERLANDS--6.5% Akzo Nobel NV ................................. 26,700 1,434,078 Getronics NV .................................. 56,600 332,702 Heineken NV ................................... 34,962 2,115,849 ING Groep NV .................................. 27,000 2,157,033 Koninklijke (Royal) Philips Electronics NV ............................... 29,979 1,098,424 ----------- TOTAL NETHERLANDS ............................. 7,138,086 ----------- SINGAPORE--1.3% Oversea-Chinese Banking Corp., Ltd. ........... 196,800 1,465,774 ----------- SPAIN--2.6% Endesa SA ..................................... 93,500 1,593,506 Telefonica SA (a) ............................. 73,002 1,206,460 ----------- TOTAL SPAIN ................................... 2,799,966 ----------- SWEDEN--1.7% Investor AB, B Shares ......................... 123,100 1,838,870 ----------- SWITZERLAND--2.3% Roche Holding AG .............................. 121 1,232,470 Zurich Financial Services AG .................. 2,116 1,275,422 ----------- TOTAL SWITZERLAND ............................. 2,507,892 ----------- UNITED KINGDOM--12.8% AstraZeneca PLC ............................... 30,405 1,534,431 BP Amoco PLC .................................. 193,700 1,564,054 Cadbury Schweppes PLC ......................... 210,984 1,460,693 Diageo PLC .................................... 134,748 1,511,165 GKN PLC ....................................... 65,900 696,680 GlaxoSmithKline PLC ........................... 46,157 1,304,459 HSBC Holdings PLC ............................. 144,578 2,129,447 National Grid Group PLC ....................... 145,900 1,327,530 Tesco PLC ..................................... 220,000 897,255 Vodafone Group PLC ............................ 425,500 1,561,994 ----------- TOTAL UNITED KINGDOM .......................... 13,987,708 ----------- UNITED STATES--41.8% American Home Products Corp. .................. 30,700 1,950,985 AT&T Corp. .................................... 34,800 602,475 AT&T Wireless Group (a) ....................... 48,400 837,925 Avaya, Inc. (a) ............................... 1 10 Bank of America Corp. ......................... 24,730 1,134,489 Bristol-Myers Squibb Co. ...................... 24,400 1,804,075 Chase Manhattan Corp. ......................... 40,000 1,817,500 Chevron Corp. ................................. 12,700 1,072,356 Citigroup, Inc. ............................... 37,633 1,921,635 Compaq Computer Corp. ......................... 56,200 845,810 Exxon Mobil Corp. ............................. 29,373 2,553,615 Federated Department Stores, Inc. (a) ......... 23,300 815,500 First Data Corp. .............................. 29,400 1,549,012 FleetBoston Financial Corp. ................... 27,000 1,014,188 General Motors Corp. .......................... 10,000 509,375 THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS. 25 ================================================================================ THE LAZARD FUNDS, INC. PORTFOLIO OF INVESTMENTS (CONTINUED) DECEMBER 31, 2000 -------------------------------------------------------------------------------- DESCRIPTION SHARES VALUE -------------------------------------------------------------------------------- LAZARD GLOBAL EQUITY PORTFOLIO (CONCLUDED) H.J. Heinz Co. ................................ 23,900 $ 1,133,756 Intel Corp. ................................... 42,900 1,289,681 International Business Machines Corp ......................................... 24,020 2,041,700 Lucent Technologies, Inc. ..................... 61,400 828,900 McDonald's Corp. .............................. 45,700 1,553,800 Merck & Co., Inc. ............................. 19,300 1,806,962 Microsoft Corp. (a) ........................... 25,100 1,088,713 Minnesota Mining & Manufacturing Co ........................................... 16,300 1,964,150 Motorola, Inc. ................................ 26,300 532,575 PepsiCo, Inc. ................................. 44,300 2,195,619 PPG Industries, Inc. .......................... 10,700 495,544 Qwest Communications International, Inc. (a) ...................... 12,300 504,300 Schering-Plough Corp. ......................... 33,500 1,901,125 Target Corp. .................................. 29,400 948,150 Texas Instruments, Inc. ....................... 20,500 971,188 The Hartford Financial Services Group, Inc. .................................. 18,860 1,331,987 Time Warner, Inc. ............................. 24,700 1,290,328 Tyco International, Ltd. ...................... 29,100 1,615,050 United Technologies Corp. ..................... 27,000 2,122,875 Verizon Communications, Inc. .................. 33,400 1,674,175 ----------- TOTAL UNITED STATES ........................... 45,719,528 ----------- TOTAL COMMON STOCKS (Identified cost $111,444,788) ................ 107,299,727 ----------- PRINCIPAL AMOUNT DESCRIPTION (000) ------- REPURCHASE AGREEMENT--2.5% State Street Bank and Trust Co., 5.80%, 01/02/01, (Dated 12/29/00, collateralized by $2,560,000 United States Treasury Note, 6.875%, 05/15/06, with a value of $2,784,000) (Identified cost $2,726,000) ................. $2,726 2,726,000 ------------ TOTAL INVESTMENTS (Identified cost $114,170,788) (b) ............ 100.6% $110,025,727 LIABILITIES IN EXCESS OF CASH AND OTHER ASSETS .............................. (0.6) (651,080) ------ ------------ NET ASSETS ..................................... 100.0% $109,374,647 ====== ============ THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS. 26 ================================================================================ THE LAZARD FUNDS, INC. PORTFOLIO OF INVESTMENTS (CONTINUED) DECEMBER 31, 2000 -------------------------------------------------------------------------------- DESCRIPTION SHARES VALUE -------------------------------------------------------------------------------- LAZARD INTERNATIONAL EQUITY PORTFOLIO COMMON STOCKS--97.5% AUSTRALIA--1.3% BHP, Ltd. ..................................... 3,865,463 $40,765,825 ----------- DENMARK--0.8% Tele Danmark A/S .............................. 615,200 25,095,187 ----------- FINLAND--1.0% UPM-Kymmene Oyj ............................... 912,300 31,310,539 ----------- FRANCE--13.2% Alcatel SA .................................... 456,100 25,910,806 Aventis SA .................................... 820,812 72,064,402 Axa ........................................... 351,590 50,842,011 BNP Paribas SA ................................ 398,122 34,953,709 Compagnie de Saint-Gobain ..................... 210,800 33,115,554 Lagardere SCA ................................. 659,900 38,294,119 Suez Lyonnaise des Eaux SA .................... 261,300 47,722,644 TotalFinaElf SA ............................... 517,670 76,996,974 Vivendi Universal SA .......................... 525,510 34,591,109 ----------- TOTAL FRANCE .................................. 414,491,328 ----------- GERMANY--7.1% Allianz AG .................................... 202,749 75,885,971 Bayerische Hypo-und Vereinsbank AG ............................... 1,164,765 65,950,957 E.On AG ....................................... 979,200 59,581,563 ThyssenKrupp AG ............................... 1,512,000 23,426,166 ----------- TOTAL GERMANY ................................. 224,844,657 ----------- ITALY--3.3% Alleanza Assicurazioni ........................ 1,446,520 23,050,044 ENI SpA ....................................... 6,341,300 40,490,458 San Paolo-IMI SpA ............................. 2,410,800 38,981,614 ----------- TOTAL ITALY ................................... 102,522,116 ----------- JAPAN--18.7% ACOM Co., Ltd. ................................ 172,300 12,705,467 Canon, Inc. ................................... 915,000 32,015,395 Fujitsu, Ltd. ................................. 2,643,000 38,932,925 Hitachi, Ltd. ................................. 4,216,000 37,542,757 Kao Corp. ..................................... 1,615,000 46,901,680 Mizuho Holdings, Inc. ......................... 7,148 44,268,580 Nippon Telegraph & Telephone Corp. ............ 4,532 32,626,277 Nissan Motor Co., Ltd. (a) .................... 10,593,000 60,970,906 NTT DoCoMo, Inc. .............................. 1,366 23,539,363 Orix Corp. .................................... 337,800 33,862,736 Sankyo Co., Ltd. .............................. 1,229,000 29,456,438 Sony Corp. .................................... 719,600 49,727,432 TDK Corp. ..................................... 433,400 42,157,173 The Nikko Securities Co., Ltd. ................ 3,488,000 27,002,099 The Sakura Bank, Ltd. ......................... 7,380,000 44,543,387 The Sumitomo Trust & Banking Co., Ltd .......................................... 4,607,000 31,312,448 ----------- TOTAL JAPAN ................................... 587,565,063 ----------- NETHERLANDS--9.8% Akzo Nobel NV ................................. 1,580,600 84,895,269 Getronics NV .................................. 2,474,214 14,543,773 Heineken NV ................................... 803,675 48,637,233 ING Groep NV .................................. 1,126,000 89,956,252 Koninklijke (Royal) Philips Electronics NV ............................... 853,197 31,260,942 Wolters Kluwer NV ............................. 1,464,200 39,926,615 ----------- TOTAL NETHERLANDS ............................. 309,220,084 ----------- PORTUGAL--1.4% Portugal Telecom SGPS SA, Registered Shares ............................ 4,741,800 43,367,828 ----------- SINGAPORE--3.5% Oversea-Chinese Banking Corp., Ltd. ........... 6,483,050 48,285,996 United Overseas Bank, Ltd. .................... 8,170,197 61,323,650 ----------- TOTAL SINGAPORE ............................... 109,609,646 ----------- SPAIN--2.8% Endesa SA ..................................... 3,053,400 52,038,625 Telefonica SA (a) ............................. 2,191,172 36,212,175 ----------- TOTAL SPAIN ................................... 88,250,800 ----------- SWEDEN--4.4% Electrolux AB, Series B ....................... 3,025,500 39,265,150 Investor AB, B Shares ......................... 4,083,800 61,003,899 Svenska Handelsbanken AB, A Shares ..................................... 2,264,100 38,738,441 ----------- TOTAL SWEDEN .................................. 139,007,490 ----------- SWITZERLAND--4.4% ABB Ltd. ...................................... 315,270 33,600,402 Roche Holding AG .............................. 4,481 45,642,119 Zurich Financial Services AG .................. 100,390 60,510,229 ----------- TOTAL SWITZERLAND ............................. 139,752,750 ----------- UNITED KINGDOM--25.8% AstraZeneca PLC ............................... 657,140 33,163,480 BAE Systems PLC ............................... 6,771,848 38,681,114 BP Amoco PLC .................................. 9,886,700 79,831,360 British Telecommunications PLC ................ 5,430,500 46,447,705 Cadbury Schweppes PLC ......................... 6,939,226 48,041,929 Diageo PLC .................................... 5,128,694 57,517,031 GKN PLC ....................................... 2,054,100 21,715,479 GlaxoSmithKline PLC ........................... 2,597,007 73,394,471 THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS. 27 ================================================================================ THE LAZARD FUNDS, INC. PORTFOLIO OF INVESTMENTS (CONTINUED) DECEMBER 31, 2000 -------------------------------------------------------------------------------- DESCRIPTION SHARES VALUE -------------------------------------------------------------------------------- LAZARD INTERNATIONAL EQUITY PORTFOLIO (CONCLUDED) Halifax Group PLC ............................. 3,589,200 $35,609,592 HSBC Holdings PLC ............................. 3,963,644 58,379,354 Invensys PLC .................................. 21,538,700 50,403,680 National Grid Group PLC ....................... 4,177,900 38,014,303 Prudential PLC ................................ 2,106,100 33,917,443 Reed International PLC ........................ 3,392,100 35,505,456 Tesco PLC ..................................... 15,137,200 61,736,033 The Great Universal Stores PLC ................ 5,749,100 45,175,295 Vodafone Group PLC ............................ 15,071,300 55,326,172 ----------- TOTAL UNITED KINGDOM .......................... 812,859,897 ----------- TOTAL COMMON STOCKS (Identified cost $2,928,618,449) .............. 3,068,663,210 ----------- PRINCIPAL AMOUNT DESCRIPTION (000) ------- REPURCHASE AGREEMENT--4.3% State Street Bank and Trust Co., 5.80%, 01/02/01, (Dated 12/29/00, collateralized by $10,755,000 United States Treasury Note, 5.50%, 01/31/03, with a value of $11,064,206, and $24,880,000 United States Treasury Note, 5.875%, 09/30/02, with a value of $25,502,000, and $46,900,000 United States Treasury Note, 6.875%, 05/15/06, with a value of $51,003,750, and $50,000,000 United States Treasury Note, 5.50%, 03/31/03, with a value of $51,000,000) (Identified cost $135,845,000) ............... $135,845 135,845,000 -------------- TOTAL INVESTMENTS (Identified cost $3,064,463,449) (b) .......................... 101.8% $3,204,508,210 LIABILITIES IN EXCESS OF CASH AND OTHER ASSETS .............................. (1.8) (55,348,710) ----- -------------- NET ASSETS ..................................... 100.0% $3,149,159,500 ===== ============== THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS. 28 ================================================================================ THE LAZARD FUNDS, INC. PORTFOLIO OF INVESTMENTS (CONTINUED) DECEMBER 31, 2000 -------------------------------------------------------------------------------- DESCRIPTION SHARES VALUE -------------------------------------------------------------------------------- LAZARD INTERNATIONAL SMALL CAP PORTFOLIO COMMON STOCKS--97.3% AUSTRALIA--1.9% Cochlear, Ltd. ................................ 322,500 $ 6,544,986 ----------- BELGIUM--1.9% Creyf's NV .................................... 269,602 6,328,905 Creyf's NV STRIP (a) .......................... 372 4 ----------- TOTAL BELGIUM ................................. 6,328,909 ----------- FINLAND--3.8% Amer Group, Ltd. .............................. 271,800 7,146,164 Sampo Insurance Co., Ltd. ..................... 111,800 6,036,360 ----------- TOTAL FINLAND ................................. 13,182,524 ----------- FRANCE--7.8% Carbone Lorraine SA ........................... 158,883 7,907,128 CNP Assurances ................................ 107,100 4,293,200 Neopost SA (a), (d) ........................... 113,800 2,671,454 SCOR SA ADR ................................... 72,700 3,653,175 Societe BIC SA ................................ 210,200 8,268,154 ----------- TOTAL FRANCE .................................. 26,793,111 ----------- GERMANY--4.4% Fielmann AG ................................... 244,100 10,131,075 SCS Standard Computersysteme (a) .............. 16,070 0 Techem AG (a) ................................. 161,546 5,096,840 ----------- TOTAL GERMANY ................................. 15,227,915 ----------- HONG KONG--2.8% Esprit Holdings, Ltd. ......................... 7,237,500 6,170,670 Shaw Brothers (Hong Kong), Ltd. ............... 2,520,500 1,955,078 VTech Holdings, Ltd. .......................... 1,788,000 1,627,601 ----------- TOTAL HONG KONG ............................... 9,753,349 ----------- IRELAND--3.4% Waterford Wedgwood PLC ........................ 9,789,288 11,490,174 ----------- ITALY--2.0% Industrie Natuzzi SpA ADR ..................... 343,100 4,202,975 Interpump Group SpA ........................... 719,700 2,777,530 ----------- TOTAL ITALY ................................... 6,980,505 ----------- JAPAN--12.2% ADERANS Co., Ltd. ............................. 64,800 2,664,101 Diamond Lease Co., Ltd. ....................... 265,000 2,723,714 Hitachi Medical Corp. ......................... 384,000 3,930,021 Hokuto Corp. .................................. 90,700 3,149,746 I S B Corp. ................................... 66,000 490,728 Impact 21 Co., Ltd. ........................... 237,600 2,070,063 Japan Digital Laboratory Co., Ltd. ............ 379,900 4,340,005 Kawasumi Laboratories, Inc. ................... 75,000 705,257 Maruichi Steel Tube, Ltd. ..................... 201,000 2,777,992 Meitec Corp. .................................. 75,500 2,417,162 Ministop Co., Ltd. ............................ 175,100 3,147,573 Nippon Shinyaku Co., Ltd. ..................... 824,000 6,804,199 Secom Techno Service Co., Ltd. ................ 99,000 2,199,615 Yoshinoya D&C Co., Ltd. ....................... 2,330 4,443,142 ----------- TOTAL JAPAN ................................... 41,863,318 ----------- NETHERLANDS--15.2% Beter Bed Holding NV .......................... 108,900 1,119,715 CSM NV ........................................ 448,900 11,128,049 Fugro NV ...................................... 136,900 8,837,748 Hunter Douglas NV ............................. 355,376 9,743,981 PinkRoccade NV (a), (d) ....................... 128,000 6,971,134 Telegraaf Holding MIJ NV ...................... 358,800 7,277,323 Wolters Kluwer NV ............................. 265,100 7,228,894 ----------- TOTAL NETHERLANDS ............................. 52,306,844 ----------- NORWAY--3.1% Merkantildata ASA (a) ......................... 917,500 3,577,039 P4 Radio Hele Norge ASA ....................... 724,800 4,531,107 Tandberg Television ASA (a) ................... 358,660 2,425,623 ----------- TOTAL NORWAY .................................. 10,533,769 ----------- SINGAPORE--0.4% Want Want Holdings, Ltd. ...................... 1,760,000 1,337,600 Want Want Holdings, Ltd., Warrants 10/24/04 (a) ................................. 155,200 17,072 ----------- TOTAL SINGAPORE ............................... 1,354,672 ----------- SPAIN--6.6% Abengoa SA .................................... 129,200 4,123,625 Aldeasa SA .................................... 217,500 4,186,765 Banco Pastor SA ............................... 106,100 4,582,883 Corporacion Mapfre, Compania Internacional de Reaseguros, SA .............. 233,100 4,443,281 Prosegur, CIA de Seguridad SA ................. 477,800 5,383,849 ----------- TOTAL SPAIN ................................... 22,720,403 ----------- SWEDEN--7.0% Elanders AB, B Shares ......................... 166,150 3,256,463 Nobel Biocare AB .............................. 305,300 9,412,258 Swedish Match AB .............................. 2,920,300 11,385,426 ----------- TOTAL SWEDEN .................................. 24,054,147 ----------- THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS. 29 ================================================================================ THE LAZARD FUNDS, INC. PORTFOLIO OF INVESTMENTS (CONTINUED) DECEMBER 31, 2000 -------------------------------------------------------------------------------- DESCRIPTION SHARES VALUE -------------------------------------------------------------------------------- LAZARD INTERNATIONAL SMALL CAP PORTFOLIO (CONCLUDED) SWITZERLAND--6.0% Bank Sarasin & Compagnie, Registered B Shares .......................... 3,846 $12,338,331 Edipresse SA .................................. 21,860 6,851,058 Gretag Imaging Group, Registered Shares ....................................... 17,671 1,526,275 ----------- TOTAL SWITZERLAND ............................. 20,715,664 ----------- UNITED KINGDOM--18.8% Ashtead Group PLC ............................. 4,219,000 7,759,666 Corporate Services Group PLC (a) .............. 3,088,700 2,655,657 Euromoney Institutional Investor PLC .......... 207,576 1,800,253 FKI PLC ....................................... 637,700 2,097,816 Kidde PLC (a) ................................. 5,234,100 5,635,117 Luminar PLC ................................... 526,300 5,207,424 Man Group PLC ................................. 1,304,700 12,037,166 Northgate PLC ................................. 794,900 4,421,645 Reckitt Benckiser PLC ......................... 592,500 8,168,601 Signet Group PLC ADR .......................... 345,012 7,676,517 SSL International PLC ......................... 942,023 7,043,036 ----------- TOTAL UNITED KINGDOM .......................... 64,502,898 ----------- TOTAL COMMON STOCKS (Identified cost $317,586,346) ................ 334,353,188 ----------- PRINCIPAL AMOUNT DESCRIPTION (000) ------- REPURCHASE AGREEMENT--7.3% State Street Bank and Trust Co., 5.80%, 01/02/01, (Dated 12/29/00, collateralized by $60,000 United States Treasury Bond, 9.125%, 05/15/09, with a value of $67,425, and $24,640,000 United States Treasury Note, 6.25%, 08/31/02, with a value of $25,502,400) (Identified cost $25,062,000) ................ $25,062 25,062,000 ------------ TOTAL INVESTMENTS (Identified cost $342,648,346) (b) ............ 104.6% $359,415,188 LIABILITIES IN EXCESS OF CASH AND OTHER ASSETS .............................. (4.6) (15,958,092) ------- ------------ NET ASSETS ..................................... 100.0% $343,457,096 ======= ============ THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS. 30 ================================================================================ THE LAZARD FUNDS, INC. PORTFOLIO OF INVESTMENTS (CONTINUED) DECEMBER 31, 2000 -------------------------------------------------------------------------------- DESCRIPTION SHARES VALUE -------------------------------------------------------------------------------- LAZARD EMERGING MARKETS PORTFOLIO COMMON STOCKS--81.0% BRAZIL--1.2% Petroleo Brasileiro SA ADR (a) ................ 159,500 $ 4,027,375 ----------- CHILE--1.9% Administradora de Fondos de Pensiones Provida SA ADR ..................... 296,000 5,994,000 ----------- GREECE--1.4% Cosmote SA (a) ................................ 113,800 928,199 Hellenic Telecommunications Organization SA .............................. 218,422 3,259,131 Hellenic Telecommunications Organization SA ADR .......................... 47,700 345,825 ----------- TOTAL GREECE .................................. 4,533,155 ----------- HONG KONG--4.4% China Mobile (Hong Kong), Ltd. ................ ADR (a) ...................................... 363,800 9,868,075 Yue Yuen Industrial (Holdings), Ltd. .......... 2,568,300 4,445,306 ----------- TOTAL HONG KONG ............................... 14,313,381 ----------- HUNGARY--1.9% Gedeon Richter Rt ............................. 52,700 3,117,546 Magyar Tavkozlesi Rt. ADR ..................... 145,300 2,969,569 ----------- TOTAL HUNGARY ................................. 6,087,115 ----------- INDIA--10.4% Hindalco Industries, Ltd. ..................... 196,000 3,097,665 Hindalco Industries, Ltd. GDR (d) ............. 39,400 703,290 Hindustan Lever, Ltd. ......................... 546,100 2,414,047 Infosys Technologies, Ltd. .................... 22,400 2,737,882 ITC, Ltd. ..................................... 238,300 4,577,116 Larsen & Toubro, Ltd. ......................... 549,000 2,301,025 Mahanagar Telephone Nigam, Ltd. ............... 1,074,569 4,122,864 Reliance Industries, Ltd. ..................... 852,700 6,192,487 Satyam Computer Services, Ltd. ................ 195,700 1,355,185 State Bank of India ........................... 1,474,500 6,077,417 ----------- TOTAL INDIA ................................... 33,578,978 ----------- INDONESIA--1.2% PT Hanjaya Mandala Sampoerna Tbk .............. 2,537,000 3,907,111 ----------- ISRAEL--3.3% Bank Hapoalim, Ltd. ........................... 1,410,400 4,091,503 Check Point Software Technologies, Ltd. (a) ..................................... 48,900 6,531,206 ----------- TOTAL ISRAEL .................................. 10,622,709 ----------- MEXICO--15.3% Carso Global Telecom, Series A1 (a) ........... 2,808,100 5,373,795 Cemex SA de CV ADR ............................ 188,080 3,397,195 Fomento Economico Mexicano SA de CV ADR .................................... 146,100 4,364,738 Grupo Aeroportuario del Sureste SA de CV, Series B (a) .......................... 1,739,300 1,628,050 Grupo Financiero Banamex Accival SA de CV, Series O (a) ....................... 4,456,000 7,322,392 Grupo Financiero Banorte SA de CV, Series O (a) .......................... 1,896,300 2,563,900 Grupo Iusacell SA de CV, Series V ADR (a) ...................................... 511,400 4,986,150 Grupo Televisa SA GDR (a) ..................... 116,100 5,217,244 Kimberly-Clark de Mexico SA de CV, Series A .............................. 715,000 1,978,055 Telefonos de Mexico SA de CV, Series L ADR ................................. 76,400 3,447,550 Tubos de Acero de Mexico SA ADR ............... 405,400 5,797,220 Wal-Mart de Mexico SA de CV, Series C (a) ................................. 1,832,800 3,373,953 ----------- TOTAL MEXICO .................................. 49,450,242 ----------- PERU--0.5% Credicorp, Ltd. ............................... 248,600 1,491,600 ----------- PHILIPPINES--1.9% Philippine Long Distance Telephone Co. ADR ...................................... 339,900 6,054,469 ----------- RUSSIA--4.5% Mobile Telesystems ADR (a) .................... 322,600 7,742,400 OAO Lukoil Holding ADR ........................ 183,900 6,804,300 ----------- TOTAL RUSSIA .................................. 14,546,700 ----------- SOUTH AFRICA--9.7% ABSA Group, Ltd. .............................. 1,063,923 4,021,171 Anglo American Platinum Corp., Ltd. ........... 48,800 2,277,806 Impala Platinum Holdings, Ltd. ................ 87,200 4,443,547 Old Mutual PLC ................................ 2,064,300 5,124,002 Sanlam, Ltd. .................................. 3,858,900 4,875,259 Sasol, Ltd. ................................... 743,800 4,811,552 South African Breweries PLC ................... 675,700 4,750,527 South African Breweries PLC (U.K.) ............ 130,600 914,916 ----------- TOTAL SOUTH AFRICA ............................ 31,218,780 ----------- SOUTH KOREA--12.0% Hyundai Electronics Industries Co., Ltd. (a) ................................ 239,700 762,682 Kookmin Bank .................................. 454,053 5,348,134 Korea Electric Power Corp. .................... 232,100 4,330,087 Korea Telecom Corp. ADR ....................... 169,036 5,240,116 Pohang Iron & Steel Co., Ltd. ................. 34,700 2,098,458 THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS. 31 ================================================================================ THE LAZARD FUNDS, INC. PORTFOLIO OF INVESTMENTS (CONTINUED) DECEMBER 31, 2000 -------------------------------------------------------------------------------- DESCRIPTION SHARES VALUE -------------------------------------------------------------------------------- LAZARD EMERGING MARKETS PORTFOLIO (CONCLUDED) Pohang Iron & Steel Co., Ltd. ADR ............. 105,000 $ 1,634,063 Samsung Electronics ........................... 58,681 7,329,326 Samsung Fire & Marine Insurance ............... 67,338 1,463,870 SK Telecom Co., Ltd. .......................... 44,330 8,866,000 SK Telecom Co., Ltd. ADR ...................... 73,401 1,729,511 ----------- TOTAL SOUTH KOREA ............................. 38,802,247 ----------- TAIWAN--7.1% ASE Test, Ltd. (a) ............................ 182,500 1,551,250 Asustek Computer, Inc. GDR (d) ................ 396,916 1,190,748 China Steel Corp. GDR ......................... 314,244 3,723,792 Compal Electronics, Inc. GDR .................. 252,668 1,768,676 Far Eastern Textile, Ltd. ..................... 520 367 Fubon Insurance Co. ........................... 5,495,000 3,334,828 Siliconware Precision Industries Co. ADR (a) .................................. 328,700 821,750 Taiwan Cellular Corp. (a) ..................... 1,135,000 1,713,466 Taiwan Semiconductor Manufacturing Co., Ltd. (a) .................. 1,866,000 4,479,076 United Microelectronics Corp. ................. ADR (a) ...................................... 435,400 3,592,050 Via Technologies, Inc. (a) .................... 159,000 859,330 ----------- TOTAL TAIWAN .................................. 23,035,333 ----------- TURKEY--2.3% Turkcell Iletisim Hizmetleri AS ADR (a) ...................................... 395,800 2,770,600 Turkiye Garanti Bankasi AS ADR (a), (d) ................................. 352,400 1,832,480 Yapi ve Kredi Bankasi AS (a) .................. 561,319,578 2,889,083 ----------- TOTAL TURKEY .................................. 7,492,163 ----------- UNITED STATES--1.5% Comverse Technology, Inc. (a) ................. 44,000 4,779,500 ----------- VENEZUELA--0.5% Compania Anonima Nacional Telefonos de Venezuela ADR ................... 94,200 1,783,913 ----------- TOTAL COMMON STOCKS (Identified cost $311,748,539) ................ 261,718,771 ----------- PREFERRED STOCKS--14.3% BRAZIL--14.3% Banco Bradesco SA ............................. 614,274,000 4,410,172 Banco Bradesco SA, rights 02/12/01 (a) ................................. 19,636,841 0 Banco Itau SA ................................. 84,961,400 8,060,441 Companhia Brasileira de Distribuicao Grupo Pao de Acucar ADR ................................... 129,900 4,741,350 Companhia de Bebidas das Americas ................................. 38,906,700 9,377,512 Companhia Paranaense de Energia-Copel ................................ 208,499,000 1,689,377 Companhia Paranaense de Energia-Copel ADR ............................ 444,600 3,751,312 Embratel Participacoes SA ADR ................. 206,000 3,231,625 Tele Norte Leste Participacoes SA ADR .......................................... 374,983 8,554,300 Telesp Celular Participacoes SA ADR ....................................... 89,800 2,424,600 ----------- TOTAL BRAZIL .................................. 46,240,689 ----------- TOTAL PREFERRED STOCKS (Identified cost $37,021,686) ................. 46,240,689 ----------- PRINCIPAL AMOUNT (000) ------- REPURCHASE AGREEMENT--8.7% State Street Bank and Trust Co., 5.80%, 01/02/01, (Dated 12/29/00, collateralized by $3,120,000 United States Treasury Note, 5.875%, 09/30/02, with a value of $3,198,000, and $24,640,000 United States Treasury Note, 6.25%, 08/31/02, with a value of $25,502,400) (Identified cost $28,133,000) ................ $28,133 28,133,000 ------------ TOTAL INVESTMENTS (Identified cost $376,903,225) (b) ............ 104.0% $336,092,460 LIABILITIES IN EXCESS OF CASH AND OTHER ASSETS .................................. (4.0) (12,942,715) ------- ------------ NET ASSETS ..................................... 100.0% $323,149,745 ======= ============ THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS. 32 ================================================================================ THE LAZARD FUNDS, INC. PORTFOLIO OF INVESTMENTS (CONTINUED) DECEMBER 31, 2000 -------------------------------------------------------------------------------- PRINCIPAL AMOUNT DESCRIPTION (000) VALUE ------- --------- LAZARD BOND PORTFOLIO ASSET-BACKED SECURITIES--10.9% Advanta Business Card Master Trust: Series 2000-B, Class A, 6.8563%, 01/20/06 (e) ........................ $ 340 $ 340,752 Series 2000-B, Class C, 7.9363%, 01/20/06 (e) ........................ 360 360,281 Associates Automobile Receivables Trust, Series 2000-1, Class M, 7.51%, 05/15/05 .............................. 400 414,375 Chevy Chase Auto Receivables Trust, Series 2000-1, Class A4, 7.47%, 07/15/05 .............................. 390 403,943 Citibank Credit Card Master Trust I, Series 1999-1, Class B, 5.75%, 02/15/06 .............................. 1,145 1,129,966 Comed Transitional Funding Trust, Series 1998-1, Class A4, 5.39%, 06/25/05 .............................. 275 271,992 Discover Card Master Trust I, Series 1999-2, Class A, 5.90%, 10/15/04 .............................. 824 823,361 First USA Credit Card Master Trust, Series 1998-1, Class C, 6.50%, 01/18/06 (d) .......................... 400 399,956 Ford Credit Auto Owner Trust, Series 2000-G, Class B, 6.92%, 04/15/05 .............................. 690 702,793 Illinois Power Special Purpose Trust, Series 1998-1, Class A4, 5.34%, 06/25/05 .............................. 230 227,051 MBNA Master Credit Card Trust: Series 1998-J, Class A, 5.25%, 02/15/06 .............................. 804 793,194 Series 1998-D, Class A, 5.80%, 12/15/05 .............................. 400 399,248 MMCA Automobile Trust, Series 2000-1, Class A4, 7.08%, 02/15/05 .............................. 365 374,467 Sears Credit Account Master Trust, Series 2000-1, Class A, 7.25%, 11/15/07 .............................. 590 608,454 ----------- TOTAL ASSET-BACKED SECURITIES (Identified cost $7,138,946) ................. 7,249,833 ----------- COLLATERALIZED MORTGAGE OBLIGATIONS--4.5% Asset Securitization Corp.: Series 1996-D2, Class ACS2, 1.5973%, 02/14/29 (e), (j) ................... 2,125 132,480 Series 1996-D3, Class A1A, 7.01%, 10/13/26 ............................. 35 35,467 Bear Stearns Commercial Mortgage Securities, Inc., Series 1999-WF2, Class A2, 7.08%, 06/15/09 .............................. 408 424,939 Merrill Lynch Mortgage Investors, Inc.: Series 1996-C1, Class IO, 0.5966%, 04/25/28 (d), (e), (j) .............. 3,821 80,020 Series 1998-C3, Class A1, 5.65%, 12/15/30 .............................. 852 839,269 Morgan Stanley Capital I, Inc.: Series 1996-WF1, Class X, 1.3677%, 01/15/13 (d), (e), (j) .............. 2,428 117,262 Series 1999-Life, Class A1, 6.97%, 10/15/08 .............................. 1,266 1,302,521 Prudential Home Mortgage Securities, Series 1993-41, Class A5, 0.92%, 10/25/10 (e), (j) ..................... 152 0 Structured Asset Securities Corp.: Series 1996-CFL, Class X2, 1.0568%, 02/25/28 (e), (j) ................... 592 8,892 Series 1996-CFL, Class X1, 1.5868%, 02/25/28 (e), (j) ................... 1,044 62,694 ----------- TOTAL COLLATERALIZED MORTGAGE OBLIGATIONS (Identified cost $3,144,200) ................. 3,003,544 ----------- CORPORATE BONDS--31.9% AEROSPACE & DEFENSE--0.7% Raytheon Co., 6.75%, 08/15/07 .............................. 450 447,309 ----------- AUTOMOTIVE & EQUIPMENT RENTAL--0.3% Renters Choice, Inc., 11.00%, 08/15/08 ............................. 100 97,125 United Rentals, Inc., Series B, 9.25%, 01/15/09 .............................. 125 95,000 ----------- 192,125 ----------- BANKING & FINANCIAL SERVICES--9.5% AT&T Capital Corp., 6.60%, 05/15/05 (f) .......................... 902 881,344 Countrywide Home Loan, Inc., 6.85%, 06/15/04 .............................. 550 551,870 FleetBoston Financial Corp., 7.25%, 09/15/05 .............................. 520 534,737 Ford Motor Credit Co., 7.50%, 03/15/05 .............................. 490 502,186 THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS. 33 ================================================================================ THE LAZARD FUNDS, INC. PORTFOLIO OF INVESTMENTS (CONTINUED) DECEMBER 31, 2000 -------------------------------------------------------------------------------- PRINCIPAL AMOUNT DESCRIPTION (000) VALUE ------- --------- LAZARD BOND PORTFOLIO (CONTINUED) General Motors Acceptance Corp., 7.50%, 07/15/05 .............................. $ 600 $ 614,320 Lehman Brothers Holdings, Inc., 8.25%, 06/15/07 .............................. 500 530,000 Lodgian Financing Corp., 12.25%, 07/15/09 ............................. 70 63,000 MBNA America Bank NA, 6.75%, 03/15/08 (d) .......................... 429 396,452 Morgan Stanley Dean Witter & Co., 7.75%, 06/15/05 .............................. 540 568,215 Paine Webber Group, Inc., 6.55%, 04/15/08 .............................. 520 524,425 Salomon Smith Barney Holdings, 6.25%, 01/15/05 .............................. 630 624,783 Washington Mutual, Inc., 7.50%, 08/15/06 .............................. 470 479,701 ----------- 6,271,033 ----------- BREWERY--1.2% Anheuser-Busch Cos., Inc., 7.10%, 06/15/07 .............................. 799 821,364 ----------- BROADCASTING--0.1% Echostar DBS Corp., 9.375%, 02/01/09 ............................. 72 69,840 ----------- BUILDING & CONSTRUCTION--0.2% Building One Services Corp., 10.50%, 05/01/09 ............................. 135 81,000 Penhall International Corp., 12.00%, 08/01/06 ............................. 80 72,800 ----------- 153,800 ----------- CABLE TELEVISION--0.2% Adelphia Communications Corp., 9.375%, 11/15/09 ............................. 40 35,200 Charter Communications Holdings LLC, 8.625%, 04/01/09 ............................. 50 45,000 LodgeNet Entertainment Corp., 10.25%, 12/15/06 ............................. 75 70,500 ----------- 150,700 ----------- CHEMICALS--0.3% ARCO Chemical Co., 9.80%, 02/01/20 .............................. 180 170,156 Geo Specialty Chemicals, Inc., 10.125%, 08/01/08 ............................ 35 29,400 ----------- 199,556 ----------- COMMERCIAL SERVICES--0.2% IT Group, Inc., Series B, 11.25%, 04/01/09 ............................. 145 113,100 ----------- CONTAINERS--0.0% Amtrol, Inc., 10.625%, 12/31/06 ............................ 12 9,540 ----------- ELECTRONICS--0.1% Motors & Gears, Inc., Series D, 10.75%, 11/15/06 ............................ 85 75,650 ----------- ENERGY--1.8% Dynegy, Inc., 7.45%, 07/15/06 .............................. 682 698,132 Midamerican Energy Co., 6.375%, 06/15/06 ............................. 454 445,687 Orion Power Holdings, Inc., 12.00%, 05/01/10 (d) ......................... 70 75,950 ----------- 1,219,769 ----------- FIBER OPTICS--0.1% Metromedia Fiber Network, Inc.: 10.00%, 12/15/09 ............................ 25 20,750 Series B, 10.00%, 11/15/08 ................... 45 37,462 Williams Communications Group, Inc., 10.875%, 10/01/09 ............................ 55 40,975 ----------- 99,187 ----------- FOOD & BEVERAGES--0.1% Agrilink Foods, Inc., 11.875%, 11/01/08 ........................... 60 39,150 ----------- HEALTHCARE--0.5% Dynacare, Inc., 10.75%, 01/15/06 ............................. 115 108,100 Fresenius Medical Capital Trust II, 7.875%, 02/01/08 ............................. 87 80,475 Hanger Orthopedic Group, Inc., 11.25%, 06/15/09 ............................. 75 24,000 HEALTHSOUTH Corp., 10.75%, 10/01/08 (d) ......................... 70 73,150 Tenet Healthcare Corp., 8.625%, 01/15/07 ............................. 40 40,950 ----------- 326,675 ----------- INDUSTRIAL & MACHINERY--1.9% Unilever Capital Corp., 7.125%, 11/01/10 ............................. 560 585,200 URS Corp., Series B, 12.25%, 05/01/09 ............................. 75 75,281 THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS. 34 ================================================================================ THE LAZARD FUNDS, INC. PORTFOLIO OF INVESTMENTS (CONTINUED) DECEMBER 31, 2000 -------------------------------------------------------------------------------- PRINCIPAL AMOUNT DESCRIPTION (000) VALUE ------- --------- LAZARD BOND PORTFOLIO (CONTINUED) USX Corp., 6.65%, 02/01/06 .............................. $ 570 $ 569,874 ----------- 1,230,355 ----------- INSURANCE--1.7% American Financial Group, 7.125%, 04/15/09 ............................. 459 406,678 Atlas Reinsurance PLC, Series A, 9.5044%, 04/04/03 (d), (e) ................... 740 738,150 ----------- 1,144,828 ----------- INTERNET SERVICES--0.0% Exodus Communications, Inc., 11.625%, 07/15/10 (d) ........................ 20 17,950 PSINet, Inc., 10.50%, 12/01/06 ............................. 10 2,600 ----------- 20,550 ----------- LODGING & ENTERTAINMENT--0.8% Courtyard by Marriott II, Ltd., Series B, 10.75%, 02/01/08 ............................. 100 101,000 John Q. Hammons Hotels, Inc., 8.875%, 02/15/04 ............................. 80 72,400 Mandalay Resort Group, Series B, 10.25%, 08/01/07 ............................. 75 74,063 MGM Grand, Inc., 9.75%, 06/01/07 .............................. 125 130,937 Station Casinos, Inc., 10.125%, 03/15/06 ............................ 130 133,900 ----------- 512,300 ----------- MANUFACTURING--0.1% High Voltage Engineering Corp., 10.50%, 08/15/04 ............................. 44 28,600 Tekni-Plex, Inc., Series B, 12.75%, 06/15/10 ............................. 40 32,000 Transdigm, Inc., 10.375%, 12/01/08 ............................ 35 31,500 ----------- 92,100 ----------- OIL & GAS--2.8% Baker Hughes, Inc., 6.25%, 01/15/09 .............................. 520 512,522 Chesapeake Energy Corp., Series B, 9.625%, 05/01/05 (f) ......................... 40 41,200 Comstock Resources, Inc., 11.25%, 05/01/07 (f) ......................... 60 62,250 KeySpan Corp., 7.25%, 11/15/05 .............................. 480 499,584 Lomak Petroleum Corp., 8.75%, 01/15/07 .............................. 65 61,263 Plains Resources, Inc., 10.25%, 03/15/06 (d) ......................... 25 24,938 Texaco Capital, Inc., 6.00%, 06/15/05 .............................. 637 639,949 ----------- 1,841,706 ----------- OIL EQUIPMENT--0.2% RBF Finance Co., 11.00%, 03/15/06 ............................. 120 138,900 ----------- PRINTING--0.2% Merrill Corp., Series B, 12.00%, 05/01/09 ............................. 52 23,400 Phoenix Color Corp., 10.375%, 02/01/09 (f) ........................ 155 110,050 ----------- 133,450 ----------- PUBLISHING--0.2% WRC Media Corp., 12.75%, 11/15/09 ............................. 175 140,219 ----------- RETAIL--0.2% Buhrmann US, Inc., 12.25%, 11/01/09 ............................. 55 55,275 Petro Stopping Centers, 10.50%, 02/01/07 ............................. 80 66,000 ----------- 121,275 ----------- TELECOMMUNICATIONS--3.2% Cox Communications, Inc., 6.15%, 08/01/03 (e), (f) ..................... 988 975,643 Crown Castle International Corp., 10.75%, 08/01/11 ............................. 35 35,875 ITC DeltaCom, Inc., 11.00%, 06/01/07 ............................. 50 40,000 Level 3 Communications, Inc.: 11.00%, 03/15/08 (f) ......................... 115 101,200 11.25%, 03/15/10 ............................. 70 60,900 Nextel International, Inc., 12.75%, 08/01/10 (d) ......................... 90 73,800 Orius Capital Corp., Series B, 12.75%, 02/01/10 ............................. 88 73,040 Spectrasite Holdings, Inc., Series B, 0.00%, 03/15/10 (g) .......................... 65 33,150 US West Communications, Inc., 5.625%, 11/15/08 ............................. 836 747,251 ----------- 2,140,859 ----------- TELEPHONE--1.7% GTE Corp., 9.10%, 06/01/03 .............................. 395 417,677 WorldCom, Inc., 7.75%, 04/01/07 .............................. 600 603,240 XO Communications, Inc., 10.75%, 06/01/09 ............................. 95 77,900 ----------- 1,098,817 ----------- THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS. 35 ================================================================================ THE LAZARD FUNDS, INC. PORTFOLIO OF INVESTMENTS (CONTINUED) DECEMBER 31, 2000 -------------------------------------------------------------------------------- PRINCIPAL AMOUNT DESCRIPTION (000) VALUE ------- --------- LAZARD BOND PORTFOLIO (CONCLUDED) TRANSPORTATION--0.4% Interpool, Inc., 6.625%, 03/01/03 ............................. $ 70 $ 62,870 North American Van Lines, Inc., 13.375%, 12/01/09 (d) ........................ 220 180,400 RailWorks Corp., 11.50%, 04/15/09 ............................. 80 28,800 ----------- 272,070 ----------- UTILITIES--3.0% AES Corp., 9.375%, 09/15/10 ............................. 100 102,250 Calpine Corp., 8.75%, 07/15/07 .............................. 50 49,720 Dominion Resources, Inc., Series B, 7.625%, 07/15/05 ............................. 545 568,457 Southern California Edison Co., 7.20%, 11/03/03 .............................. 515 438,533 Texas Utilities Co., Series B, 6.375%, 10/01/04 ............................. 821 814,292 ----------- 1,973,252 ----------- WASTE MANAGEMENT--0.2% Allied Waste North America, Inc., Series B, 10.00%, 08/01/09 ............................. 120 113,100 ----------- TOTAL CORPORATE BONDS (Identified cost $21,662,433) ................. 21,162,579 ----------- SHARES ----------- WARRANTS--0.0% PRINTING--0.0% Merrill Corp., Class B, 05/01/09 (Identified cost $627) (a), (d) .............. 52 1 ----------- PRINCIPAL AMOUNT (000) ------- MORTGAGE PASS-THROUGH SECURITIES--20.6% Federal Home Loan Mortgage Corp.: Pool#G10933, 6.00%, 08/01/14 ................. $ 1,400 1,384,251 Pool#E00808, 6.50%, 02/01/15 ................. 578 577,618 Pool#E80032, 6.50%, 02/01/15 ................. 695 695,602 Pool#W10002, 6.775%, 11/01/03 ................ 727 739,716 Pool#E80516, 7.50%, 05/01/15 ................. 1,090 1,113,815 Pool#E80580, 7.50%, 05/01/15 ................. 457 467,087 Pool#C33113, 7.50%, 12/01/29 ................. 843 856,611 Pool#C41239, 8.00%, 08/01/30 ................. 1,671 1,713,439 Pool#C41633, 8.00%, 08/01/30 ................. 1,883 1,930,969 Pool#410425, 8.308%, 09/01/26 (e) ............ 38 38,942 6.50%, TBA 01/01 ............................. 977 967,836 7.50%, TBA 01/01 ............................. 1,038 1,052,594 8.00%, TBA 01/01 ............................. 142 145,327 Federal National Mortgage Association: Pool#342042, 8.187%, 06/01/25 (e) ............ 61 62,382 Pool#303824, 8.326%, 07/01/25 (e) ............ 84 86,280 Government National Mortgage Association: Pool#80120, 7.125%, 10/20/27 ................. 410 413,952 Pool#80208, 7.375%, 06/20/28 ................. 679 683,390 Pool#80093, 7.75%, 07/20/27 .................. 89 90,683 Pool#479581, 8.00%, 09/15/30 ................. 43 43,741 Pool#529756, 8.00%, 09/15/30 ................. 544 558,728 ----------- TOTAL MORTGAGE PASS-THROUGH SECURITIES (Identified cost $13,105,167) ................. 13,622,963 ----------- U.S. GOVERNMENT SECURITIES--10.6% Federal Home Loan Mortgage Corp.: 5.00%, 01/15/04 .............................. 950 932,777 6.25%, 10/15/02 .............................. 359 362,927 6.375%, 11/15/03 ............................. 1,500 1,528,125 Federal National Mortgage Association: 6.50%, 08/15/04 .............................. 344 353,030 6.625%, 10/15/07 ............................. 290 302,641 6.625%, 09/15/09 ............................. 1,350 1,406,741 7.125%, 02/15/05 ............................. 2,055 2,158,716 Resolution Funding Corp. STRIP, 0.00%, 01/15/21 .............................. 29 8,837 ----------- TOTAL U.S. GOVERNMENT SECURITIES (Identified cost $6,900,693) .................. 7,053,794 ----------- U.S. TREASURY SECURITIES--14.4% United States Treasury Notes: 3.625%, 07/15/02 ............................. 2,004 2,006,353 6.00%, 08/15/09 .............................. 5,435 5,734,794 6.125%, 11/15/27 ............................. 800 860,128 United States Treasury STRIPS: 0.00%, 11/15/09 .............................. 39 24,241 0.00%, 02/15/11 .............................. 1,555 914,527 ----------- TOTAL U.S. TREASURY SECURITIES (Identified cost $9,297,510) .................. 9,540,043 ----------- COMMERCIAL PAPER--2.9% General Motors Acceptance Corp., 6.59%, 01/16/01 (Identified cost $1,907,747) ................. 1,913 1,907,747 ----------- TOTAL INVESTMENTS (Identified cost $63,157,323) (b) ............. 95.8% $63,540,504 CASH AND OTHER ASSETS IN EXCESS OF LIABILITIES ................................ 4.2 2,763,908 ----------- ----------- NET ASSETS ..................................... 100.0% $66,304,412 =========== =========== THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS. 36 ================================================================================ THE LAZARD FUNDS, INC. PORTFOLIO OF INVESTMENTS (CONTINUED) DECEMBER 31, 2000 -------------------------------------------------------------------------------- PRINCIPAL AMOUNT DESCRIPTION (000) VALUE ------- --------- LAZARD HIGH YIELD PORTFOLIO CORPORATE BONDS--91.0% AEROSPACE & DEFENSE--1.5% Sabreliner Corp., 11.00%, 06/15/08 (d) ......................... $ 1,465 $ 1,181,156 ----------- AUTOMOTIVE & EQUIPMENT RENTAL--2.0% Neff Corp., 10.25%, 06/01/08 ............................. 1,505 662,200 Renters Choice, Inc., 11.00%, 08/15/08 ............................. 940 912,975 ----------- 1,575,175 ----------- BROADCASTING--1.5% Echostar DBS Corp., 9.375%, 02/01/09 ............................. 850 824,500 Golden Sky DBS, Inc., Series B, 0.00%, 03/01/07 (g) .......................... 645 367,650 ----------- 1,192,150 ----------- BUILDING & CONSTRUCTION--2.3% Building One Services Corp., 10.50%, 05/01/09 ............................. 1,700 1,020,000 Penhall International Corp., 12.00%, 08/01/06 ............................. 890 809,900 ----------- 1,829,900 ----------- CABLE TELEVISION--6.8% Adelphia Communications Corp., 9.375%, 11/15/09 ............................. 780 686,400 Cable Satisfaction International, Inc., 12.75%, 03/01/10 ............................. 500 265,000 Charter Communications Holdings LLC, 8.625%, 04/01/09 ............................. 485 436,500 Diamond Cable Communications Co., 13.25%, 09/30/04 (g) ......................... 940 883,600 Echostar Broadband Corp., 10.375%, 10/01/07 (d) ........................ 245 240,712 LodgeNet Entertainment Corp., 10.25%, 12/15/06 ............................. 985 925,900 Ono Finance PLC, 13.00%, 05/01/09 ............................. 1,060 773,800 Telewest PLC, 9.875%, 02/01/10 ............................. 1,400 1,148,000 ----------- 5,359,912 ----------- CHEMICALS--4.1% Agriculture Minerals & Chemicals, 10.75%, 09/30/03 ............................. 1,330 798,000 ARCO Chemical Co., 9.80%, 02/01/20 .............................. 735 694,802 Geo Specialty Chemicals, Inc., 10.125%, 08/01/08 ............................ 430 361,200 Lyondell Chemical Co., 10.875%, 05/01/09 ............................ 455 427,700 Sterling Chemicals Holdings, Inc., 0.00%, 08/15/08 (g) .......................... 680 102,000 Sterling Chemicals, Inc.: Series A, 11.25%, 04/01/07 ................... 675 317,250 Series B, 12.375%, 07/15/06 ................. 605 553,575 ----------- 3,254,527 ----------- COMMERCIAL SERVICES--2.7% IT Group, Inc., Series B, 11.25%, 04/01/09 ............................. 1,700 1,326,000 SITEL Corp., 9.25%, 03/15/06 .............................. 960 801,600 ----------- 2,127,600 ----------- CONTAINERS--1.9% Amtrol, Inc., 10.625%, 12/31/06 ............................ 144 114,480 BWAY Corp., Series B, 10.25%, 04/15/07 ............................. 870 793,875 U. S. Can Corp., 12.375%, 10/01/10 (d) ........................ 635 628,650 ----------- 1,537,005 ----------- ELECTRONICS--1.2% Motors & Gears, Inc., Series D, 10.75%, 11/15/06 ............................. 1,090 970,100 ----------- ENERGY--1.8% Orion Power Holdings, Inc., 12.00%, 05/01/10 (d) ......................... 1,295 1,405,075 ----------- EQUIPMENT RENTAL--1.4% United Rentals, Inc., Series B: 9.00%, 04/01/09 .............................. 800 600,000 9.25%, 01/15/09 .............................. 700 532,000 ----------- 1,132,000 ----------- THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS. 37 ================================================================================ THE LAZARD FUNDS, INC. PORTFOLIO OF INVESTMENTS (CONTINUED) DECEMBER 31, 2000 -------------------------------------------------------------------------------- PRINCIPAL AMOUNT DESCRIPTION (000) VALUE ------- --------- LAZARD HIGH YIELD PORTFOLIO (CONTINUED) FIBER OPTICS--2.7% 360 Networks, Inc., 13.00%, 05/01/08 ............................. $ 520 $ 416,000 Metromedia Fiber Network, Inc.: 10.00%, 12/15/09 ............................. 285 236,550 Series B, 10.00%, 11/15/08 ................... 805 670,163 Williams Communications Group, Inc.: 10.875%, 10/01/09 ............................ 175 130,375 11.70%, 08/01/08 ............................. 850 654,500 ----------- 2,107,588 ----------- FINANCIAL SERVICES--1.6% Lodgian Financing Corp., 12.25%, 07/15/09 ............................. 1,440 1,296,000 ----------- FOOD & BEVERAGES--1.0% Agrilink Foods, Inc., 11.875%, 11/01/08 ............................ 1,240 809,100 ----------- HEALTHCARE--4.7% Dynacare, Inc., 10.75%, 01/15/06 ............................ 995 935,300 Fresenius Medical Capital Trust II, 7.875%, 02/01/08 ............................. 210 194,250 Hanger Orthopedic Group, Inc., 11.25%, 06/15/09 ............................. 1,460 467,200 HEALTHSOUTH Corp., 10.75%, 10/01/08 (d) ......................... 1,315 1,374,175 Tenet Healthcare Corp., Series B, 9.25%, 09/01/10 .............................. 655 711,494 ----------- 3,682,419 ----------- INDUSTRIAL & MACHINERY--3.6% Interpool Capital Trust, Series B, 9.875%, 02/15/27 ............................. 1,600 912,000 Travelcenters of America, Inc., 12.75%, 05/01/09 ............................. 720 698,400 URS Corp., Series B, 12.25%, 05/01/09 ............................. 1,270 1,274,763 ----------- 2,885,163 ----------- INTERNET SERVICES--1.9% Exodus Communications, Inc., 11.625%, 07/15/10 (d) ....................... 1,235 1,108,413 Globix Corp., 12.50%, 02/01/10 ............................. 635 234,950 PSINet, Inc., 10.50%, 12/01/06 ............................. 670 174,200 ----------- 1,517,563 ----------- LODGING & ENTERTAINMENT--6.0% Anchor Gaming, Inc., 9.875%, 10/15/08 ................... 780 801,450 Courtyard by Marriott II, Ltd., Series B, 10.75%, 02/01/08 ................... 700 707,000 John Q. Hammons Hotels, Inc., 8.875%, 02/15/04 ................... 1,400 1,267,000 Mandalay Resort Group, Series B, 10.25%, 08/01/07 ................... 755 745,562 MGM Grand, Inc., 9.75%, 06/01/07 .................... 410 429,475 Station Casinos, Inc., 9.875%, 07/01/10 (d) ............... 780 800,475 --------- 4,750,962 --------- MANUFACTURING--5.8% Foamex LP: 9.875%, 06/15/07 ................... 1,350 742,500 13.50%, 08/15/05 ................... 415 249,000 High Voltage Engineering Corp., 10.50%, 08/15/04 ................... 1,020 663,000 Holley Performance Products, Inc., Series B, 12.25%, 09/15/07 ................... 1,010 535,300 Resolution Performance Products, 13.50%, 11/15/10 (d) ............... 820 842,550 Tekni-Plex, Inc., Series B, 12.75%, 06/15/10 ................... 750 600,000 Transdigm, Inc., 10.375%, 12/01/08 .................. 1,050 945,000 --------- 4,577,350 --------- OIL & GAS--5.3% Chesapeake Energy Corp., Series B, 9.625%, 05/01/05 ................... 815 839,450 CMS Energy Corp., 9.875%, 10/15/07 ................... 560 583,800 Comstock Resources, Inc., 11.25%, 05/01/07 ................... 1,055 1,094,562 Lomak Petroleum Corp., 8.75%, 01/15/07 .................... 1,270 1,196,975 Plains Resources, Inc., 10.25%, 03/15/06 (d) ............... 480 478,800 --------- 4,193,587 --------- OIL EQUIPMENT--0.8% Grant Prideco, Inc., 9.625%, 12/01/07 (d) .............. 500 516,250 THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS. 38 ================================================================================ THE LAZARD FUNDS, INC. PORTFOLIO OF INVESTMENTS (CONTINUED) DECEMBER 31, 2000 -------------------------------------------------------------------------------- PRINCIPAL AMOUNT DESCRIPTION (000) VALUE ------- --------- LAZARD HIGH YIELD PORTFOLIO (CONTINUED) RBF Finance Co., 11.00%, 03/15/06 ............................ $ 115 $ 133,113 ----------- 649,363 ----------- PRINTING--1.6% Merrill Corp., Series B, 12.00%, 05/01/09 ............................. 963 433,350 Phoenix Color Corp., 10.375%, 02/01/09 ............................ 1,120 795,200 ----------- 1,228,550 ----------- PUBLISHING--1.2% WRC Media Corp., 12.75%, 11/15/09 ............................. 1,175 941,469 ----------- RESTAURANTS--0.1% Advantica Restaurant Group, Inc., 11.25%, 01/15/08 ............................. 210 97,125 ----------- RETAIL--2.0% Buhrmann US, Inc., 12.25%, 11/01/09 ............................. 545 547,725 Petro Stopping Centers, 10.50%, 02/01/07 ............................. 1,215 1,002,375 ----------- 1,550,100 ----------- TELECOMMUNICATIONS--16.0% Colo.com, 13.875%, 03/15/10 (d) ........................ 670 422,100 Colt Telecom Group PLC, 0.00%, 12/15/06 (g) .......................... 1,335 1,201,500 Crown Castle International Corp., 10.75%, 08/01/11 ............................. 785 804,625 Global Crossing Holdings, Ltd., 9.50%, 11/15/09 .............................. 1,140 1,077,300 GT Group Telecom, Inc., 0.00%, 02/01/10 (g) .......................... 1,160 382,800 Horizon PCS, Inc., 0.00%, 10/01/10 (d), (g) ..................... 1,730 709,300 Hyperion Telecommunications, Inc., 12.00%, 11/01/07 ............................. 1,525 579,500 IMPSAT Fiber Networks, Inc., 13.75%, 02/15/05 ............................. 610 396,500 International Cable Telecom, Inc., Series B, 0.00%, 02/01/06 (g) .......................... 185 158,637 IPCS, Inc., 0.00%, 07/15/10 (d), (g) ..................... 2,150 860,000 ITC DeltaCom, Inc.: 9.75%, 11/15/08 .............................. 130 98,800 11.00%, 06/01/07 ............................. 625 500,000 Level 3 Communications, Inc.: 11.00%, 03/15/08 ............................. 460 404,800 11.25%, 03/15/10 ............................. 1,095 952,650 Nextel Communications, Inc., 12.00%, 11/01/08 ............................. 500 525,000 Nextel International, Inc., 12.75%, 08/01/10 (d) ......................... 1,165 955,300 Orius Capital Corp., Series B, 12.75%, 02/01/10 ............................. 1,310 1,087,300 Pegasus Communications Corp., Series B, 9.75%, 12/01/06 .............................. 275 255,750 Spectrasite Holdings, Inc., Series B, 0.00%, 03/15/10 (g) .......................... 1,260 642,600 Ubiquitel Operating Co., 0.00%, 04/15/10 (g) .......................... 1,759 703,600 ----------- 12,718,062 ----------- TELEPHONE--0.8% Versatel Telecom BV, 11.875%, 07/15/09 ............................ 280 168,000 XO Communications, Inc., 10.75%, 11/15/08 ............................. 565 460,475 ----------- 628,475 ----------- TRANSPORTATION--3.8% North American Van Lines, Inc., 13.375%, 12/01/09 (d) ........................ 1,690 1,385,800 Railamerica Transportation Corp., 12.875%, 08/15/10 (d) ........................ 1,360 1,128,800 RailWorks Corp., 11.50%, 04/15/09 ............................. 1,480 532,800 ----------- 3,047,400 ----------- UTILITIES--2.4% AES Corp., 9.375%, 09/15/10 ............................. 1,350 1,380,375 Calpine Corp., 8.75%, 07/15/07 .............................. 525 522,060 ----------- 1,902,435 ----------- WASTE MANAGEMENT--2.5% Allied Waste North America, Inc., Series B, 10.00%, 08/01/09 ............................. 2,130 2,007,525 ----------- TOTAL CORPORATE BONDS (Identified cost $84,260,752) ................. 72,154,836 ----------- THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS. 39 ================================================================================ THE LAZARD FUNDS, INC. PORTFOLIO OF INVESTMENTS (CONTINUED) DECEMBER 31, 2000 -------------------------------------------------------------------------------- DESCRIPTION SHARES VALUE -------------------------------------------------------------------------------- LAZARD HIGH YIELD PORTFOLIO (CONCLUDED) PREFERRED STOCKS--3.8% BROADCASTING--1.7% Granite Broadcasting Corp. (a) ................ 944 $ 122,720 Paxson Communications Corp. (a) ............... 132 1,201,200 ----------- 1,323,920 ----------- HEALTHCARE--0.0% Harborside Healthcare Corp. (a) ............... 400 8,400 ----------- MANUFACTURING--0.2% High Voltage Engineering Corp. ................ Series A (a) ................................. 335 173,362 ----------- TELECOMMUNICATIONS--1.5% Nextel Communications, Inc. ................... Series E (a) ................................. 1,279 1,202,260 ----------- TELEPHONE--0.4% XO Communications, Inc. (a) ................... 10,131 293,799 ----------- TOTAL PREFERRED STOCKS (Identified cost $4,680,739) .................. 3,001,741 ----------- WARRANTS--0.2% CABLE TELEVISION--0.1% Cable Satisfaction International, Inc., 03/01/05 (a) ................................. 500 5,000 Ono Finance PLC, 05/31/09 (a), (d) ............ 500 30,000 ----------- 35,000 ----------- INTERNET SERVICES--0.0% FirstWorld Communications, Inc., 04/15/08 (a), (d) ............................ 365 5,110 ----------- PRINTING--0.0% Merrill Corp., Class B, 05/01/09 (a), (d) ............................ 963 10 ----------- TELECOMMUNICATIONS--0.1% GT Group Telecom, Inc., Class B, 02/01/10 (a), (d) ............................ 1,160 50,460 Motient Corp., 04/01/08 (a), (d) .............. 1,345 13,450 Ubiquitel Operating Co., 04/15/10 (a), (d) ............................ 1,259 25,180 ----------- 89,090 ----------- TEXTILES--0.0% Globe Holdings, Inc., 08/01/09 (a) ............ 300 3 ----------- TRANSPORTATION--0.0% Railamerica Transportation Corp., 08/15/10 (a), (d) ............................ 1,360 13,600 ----------- TOTAL WARRANTS (Identified cost $264,960) .................... 142,813 ----------- TOTAL INVESTMENTS (Identified cost $89,206,451) (b) ............. 95.0% $75,299,390 CASH AND OTHER ASSETS IN EXCESS OF LIABILITIES ................................ 5.0 4,004,453 ----------- ----------- NET ASSETS ..................................... 100.0% $79,303,843 =========== =========== THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS. 40 ================================================================================ THE LAZARD FUNDS, INC. PORTFOLIO OF INVESTMENTS (CONTINUED) DECEMBER 31, 2000 -------------------------------------------------------------------------------- PRINCIPAL AMOUNT DESCRIPTION (000) VALUE ------- --------- LAZARD INTERNATIONAL FIXED-INCOME PORTFOLIO CURRENCY DENOMINATED BONDS--89.7% ARGENTINA--0.2% Citibank ARS Linked Time Deposit, 13.00%, 01/22/01 (i) ..................... USD 169 $ 169,760 ----------- AUSTRALIA--0.5% Australian Government, 8.75%, 08/15/08 .............................. 600 401,794 ----------- AUSTRIA--1.1% Republic of Austria: 4.50%, 09/28/05 .......................... JPY 80,000 816,935 6.25%, 10/16/03 .......................... JPY 15,000 151,653 ----------- TOTAL AUSTRIA ................................. 968,588 ----------- BRAZIL--0.6% Deutsche Bank LTN Linked Notes: 19.30%, 03/01/01 (i) ..................... USD 235 246,727 17.18%, 08/01/01 (i) ..................... USD 75 74,040 17.40%, 08/01/01 (i) ..................... USD 70 69,370 Salomon, Inc. Linked Brazil Inflation Indexed Note, 6.00%, 12/02/02 (d), (i) ................. USD 95 93,011 ----------- TOTAL BRAZIL .................................. 483,148 ----------- CANADA--2.7% Argos Funding Trust, 5.9625%, 02/27/06 (d), (f) ................... 250 161,801 Cable Satisfaction International, Inc., 12.75%, 03/01/10 (f) ..................... USD 170 90,100 Molson Breweries Co., Ltd., Series A, 6.00%, 06/02/08 (f) .......................... 800 522,514 North American Capital Corp., 8.25%, 11/17/03 (f) ...................... GBP 576 894,022 Province of Quebec, 5.125%, 01/04/09 ......................... EUR 400 364,144 Quebec Housing Corp., Series N, 8.95%, 05/13/13 (f) .......................... 397 327,100 ----------- TOTAL CANADA .................................. 2,359,681 ----------- CAYMAN ISLANDS--0.5% Toyo Trust Bank Finance Cayman, Ltd., 7.4975%, 03/18/07 (e) ................... USD 486 471,420 ----------- COSTA RICA--0.2% Citibank CRC Linked Time Deposit: 13.75%, 01/22/01 (i) .................... USD 133 134,024 14.50%, 01/18/01 (i) .................... USD 14 14,326 ----------- TOTAL COSTA RICA .............................. 148,350 ----------- DENMARK--3.8% Nykredit AS, 6.00%, 10/01/29 (f) .......................... 11,342 1,368,708 Unikredit Realkredit, 7.00%, 07/01/29 (f) .......................... 15,360 1,924,170 ----------- TOTAL DENMARK ................................. 3,292,878 ----------- FRANCE--6.4% Government of France: 6.50%, 10/25/06 .......................... EUR 2,800 2,868,456 STRIP, 0.00%, 04/25/23 ................... EUR 6,760 1,845,227 Lafarge SA, 6.375%, 07/26/07 ......................... EUR 850 808,526 ----------- TOTAL FRANCE .................................. 5,522,209 ----------- GERMANY--10.6% Brokat Infosystems AG, 11.50%, 03/31/10 ......................... EUR 40 24,677 Bundesrepublik Deutschland STRIP, 0.00%, 01/04/24 .......................... EUR 4,965 1,314,465 Callahan Nordrhein Westfalen, 14.00%, 07/15/10 (d) ..................... EUR 95 83,407 Core, Series 1998-1A, Class B3, 7.8531%, 01/16/06 (d), (e), (j) .......... EUR 400 189,410 DePfa Pfandbriefbank AG, 5.50%, 01/15/10 (d) ...................... EUR 270 255,558 DSL Bank AG, 7.25%, 08/07/07 (f) ...................... GBP 630 998,848 Ekabel Hessen GMBH, 14.50%, 09/01/10 (d) ..................... EUR 175 147,892 Frank Hypobank Center, 6.375%, 02/04/08 ......................... GBP 365 557,219 Grohe Holding GMBH, 11.50%, 11/15/10 (d) ..................... EUR 115 111,225 Land Hessen, 6.00%, 11/29/13 (e), (f), (g) ............ EUR 511 519,758 Landesbank Hessen-Thueringen Girozentrale, 9.00%, 09/06/04 .......................... GBP 230 375,317 Landesbank Schleswig-Holstein, 8.00%, 12/28/06 .......................... GBP 250 403,451 Landwirtschaftliche Rentenbank, 6.375%, 03/09/05 ......................... GBP 270 410,998 Republic of Deutschland: Series 1997, 6.00%, 07/04/07 ............. EUR 2,000 2,006,267 Series 1995, 6.50%, 10/14/05 ............ EUR 920 932,385 WestLB Finance Curacao NV: 8.125%, 01/24/07 ......................... GBP 310 503,991 8.50%, 06/02/03 .......................... GBP 250 392,946 ----------- TOTAL GERMANY ................................. 9,227,814 ----------- THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS. 41 ================================================================================ THE LAZARD FUNDS, INC. PORTFOLIO OF INVESTMENTS (CONTINUED) DECEMBER 31, 2000 -------------------------------------------------------------------------------- PRINCIPAL AMOUNT DESCRIPTION (000) VALUE ------- --------- LAZARD INTERNATIONAL FIXED-INCOME PORTFOLIO (CONTINUED) GREECE--2.0% Republic of Hellenic: 5.75%, 03/31/08 .......................... EUR 1,720 $ 1,651,419 8.90%, 04/01/03 .............................. 21,500 64,221 ----------- TOTAL GREECE .................................. 1,715,640 ----------- HUNGARY--0.5% Government of Hungary: 9.50%, 01/12/02 .............................. 55,300 194,024 13.50%, 11/24/01 ............................. 77,300 279,772 ----------- TOTAL HUNGARY ................................. 473,796 ----------- IRELAND--0.6% Atlas Reinsurance PLC, Series A, 9.5044%, 04/04/03 (d), (e) ............... USD 500 498,750 ----------- ITALY--4.9% Films PLC, 5.8869%, 03/31/05 (e) ........................ 1,360,000 428,702 Republic of Italy, 1.80%, 02/23/10 .......................... JPY 432,000 3,844,997 ----------- TOTAL ITALY ................................... 4,273,699 ----------- JAPAN--3.8% Export-Import Bank of Japan, 4.375%, 10/01/03 (f) ......................... 234,000 2,257,101 Spires, Ltd., 2.48%, 01/23/02 .............................. 117,989 1,040,351 ----------- TOTAL JAPAN ................................... 3,297,452 ----------- LUXEMBOURG--0.0% PTC International Finance II SA, 11.25%, 12/01/09 ......................... EUR 15 12,064 ----------- MEXICO--0.2% Citibank MXN Linked Time Deposit, 22.75%, 12/03/01 (i) ..................... USD 85 104,941 United Mexican States: 9.875%, 01/15/07 ......................... USD 95 100,462 Rights 01/01/03 .......................... USD 1 0 ----------- TOTAL MEXICO ............................. 205,403 ----------- NAMIBIA--0.1% Government of Namibia: 12.00%, 04/15/02 ......................... SAR 210 27,583 12.00%, 04/15/05 ......................... SAR 210 26,153 ----------- TOTAL NAMIBIA ............................ 53,736 ----------- NETHERLANDS--1.5% Completel Europe NV, Series B, 14.00%, 04/15/10 ......................... EUR 245 184,044 Flowserve Finance BV, 12.25%, 08/15/10 ......................... EUR 75 71,129 Jones Lang LaSalle Finance BV, 9.00%, 06/15/07 (d) ...................... EUR 40 38,950 Kappa Beheer BV: 0.00%, 07/15/09 (g) ...................... EUR 15 9,437 10.625%, 07/15/09 ........................ EUR 205 194,901 KPNQwest BV, 7.125%, 06/01/09 ......................... EUR 80 65,880 Tele1 Europe BV, 13.00%, 05/15/09 ......................... EUR 195 166,625 United Pan-Europe Communications NV, Series B: 0.00%, 11/01/09 (g) ...................... EUR 90 27,339 11.25%, 02/01/10 ......................... EUR 205 125,122 Versatel Telecom BV, 11.875%, 07/15/09 ........................ EUR 85 51,880 Wolters Kluwer NV, 5.50%, 09/22/06 .......................... EUR 420 394,167 ----------- TOTAL NETHERLANDS ........................ 1,329,474 ----------- PANAMA--0.1% Republic of Panama, 7.75%, 07/17/16 (e) ...................... USD 83 63,323 ----------- PHILIPPINES--0.1% Republic of Philippines, 9.875%, 01/15/19 ......................... USD 55 43,725 ----------- SOUTH AFRICA--0.2% Lesotho Water: 12.00%, 12/01/05 ............................. 740 96,293 12.50%, 04/15/02 ............................. 870 116,123 South African Roads, 11.50%, 09/30/05 ............................. 270 34,479 ----------- TOTAL SOUTH AFRICA ............................ 246,895 ----------- SOUTH KOREA--0.0% Salomon, Inc. MSB Linked Korea Currency Indexed Note, 6.95%, 01/10/01 (d), (i) ................. USD 21 19,263 ----------- SPAIN--3.4% Generalitat de Catalunya, 9.30%, 11/24/03 .......................... EUR 402 422,354 Spanish Government, 6.00%, 01/31/08 .......................... EUR 2,580 2,553,077 ----------- TOTAL SPAIN ................................... 2,975,431 ----------- THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS. 42 ================================================================================ THE LAZARD FUNDS, INC. PORTFOLIO OF INVESTMENTS (CONTINUED) DECEMBER 31, 2000 -------------------------------------------------------------------------------- PRINCIPAL AMOUNT DESCRIPTION (000) VALUE ------- --------- LAZARD INTERNATIONAL FIXED-INCOME PORTFOLIO (CONTINUED) SUPRANATIONAL--16.2% European Investment Bank, 3.00%, 09/20/06 (f) ...................... JPY 510,000 $ 4,900,586 Inter-American Development Bank, 1.90%, 07/08/09 (f) ...................... JPY 295,000 2,681,695 International Bank for Reconstruction and Development: 2.00%, 02/18/08 (f) ...................... JPY 174,000 1,599,667 4.75%, 12/20/04 .......................... JPY 486,000 4,906,751 ----------- TOTAL SUPRANATIONAL ........................... 14,088,699 ----------- SWEDEN--3.1% AB Spintab, 7.50%, 06/15/04 .............................. 8,600 983,389 Alfa Laval Special Finance AB, 12.125%, 11/15/10 (d) .................... EUR 165 165,780 Government of Sweden, 5.00%, 01/15/04 .............................. 5,600 604,137 Stadshypotek AB, 3.50%, 09/15/04 .............................. 9,000 907,056 ----------- TOTAL SWEDEN .................................. 2,660,362 ----------- TURKEY--0.2% Cellco Finance NV: 12.75%, 08/01/05 ......................... USD 100 94,000 15.00%, 08/01/05 ......................... USD 50 48,500 ----------- TOTAL TURKEY .................................. 142,500 ----------- UNITED KINGDOM--9.0% Aes Drax Energy Ltd., 11.25%, 08/30/10 (d) ......................... 30 47,102 Avecia Group PLC, 11.00%, 07/01/09 ......................... USD 240 237,000 BAE Systems PLC, 7.45%, 11/29/03 (f) .......................... 240 359,834 Birmingham Midshires Building Society, 9.125%, 01/05/06 (f) ......................... 300 497,307 Coca-Cola Enterprises PLC, 6.75%, 03/12/08 .............................. 158 239,246 Colt Telecom Group PLC, 7.625%, 07/31/08 (f) ..................... DEM 455 198,241 Coral Group Holdings PLC, Series B, 13.50%, 09/30/09 ............................. 65 95,251 Diamond Holdings PLC, 10.00%, 02/01/08 (f) ......................... 85 101,680 Energis PLC, 9.50%, 06/15/09 .............................. 95 130,689 Gala Group Holdings PLC, 12.00%, 06/01/10 (d) ......................... 85 130,151 Imperial Tobacco Finance PLC, 6.375%, 09/27/06 ......................... EUR 410 387,492 IPC Magazines Group PLC: 0.00%, 03/15/08 (g) .......................... 65 54,186 9.625%, 03/15/08 ............................. 70 84,783 Jazztel PLC, 14.00%, 07/15/10 ......................... EUR 355 223,341 Luxfer Holdings PLC, 10.125%, 05/01/09 ............................ 275 390,647 Ono Finance PLC: 14.00%, 07/15/10 ......................... EUR 85 65,448 14.00%, 07/15/10 (d) ..................... EUR 215 157,572 Regional Independent Media: 0.00%, 07/01/08 (g) .......................... 120 139,960 10.50%, 07/01/08 ......................... USD 170 170,033 Telewest PLC, 0.00%, 04/15/09 (g) .......................... 200 139,063 TM Group Holdings PLC, 11.00%, 05/15/08 ......................... USD 130 111,800 United Kingdom Treasury, 7.50%, 12/07/06 .............................. 2,100 3,511,922 West Coast Train Finance, 6.00%, 03/31/15 .............................. 230 325,812 ----------- TOTAL UNITED KINGDOM .......................... 7,798,560 ----------- UNITED STATES--17.2% Airtouch Communications, 5.50%, 07/24/08 (f) ..................... DEM 1,200 553,885 Citibank Credit Card Master Trust: Series A, 5.125%, 01/16/09 (f) .......... FRF 6,600 921,699 Series 1997-5, 5.75%, 07/16/07 (f) ............................ DEM 2,250 1,094,977 Citicorp, 6.25%, 09/19/09 (f) ..................... DEM 1,020 495,062 Corning, Inc., 5.625%, 02/18/05 (d) .................... EUR 140 131,328 Countrywide Home Loan, Inc., 5.25%, 12/15/05 (f) ..................... DEM 800 368,354 Exodus Communications, Inc., 11.375%, 07/15/08 ....................... EUR 215 182,706 Fannie Mae, 2.125%, 10/09/07 ........................ JPY 430,000 3,981,412 Ford Motor Credit Co., 5.25%, 06/16/08 ......................... DEM 572 258,403 General Motors Acceptance Corp. Swift Trust, Series 1999-1, 5.00%, 01/18/05 (d) ..................... EUR 370 341,819 HCA-The Healthcare Co., 8.75%, 11/01/10 ......................... GBP 195 304,705 THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS. 43 ================================================================================ THE LAZARD FUNDS, INC. PORTFOLIO OF INVESTMENTS (CONTINUED) DECEMBER 31, 2000 -------------------------------------------------------------------------------- PRINCIPAL AMOUNT DESCRIPTION (000) VALUE ------- --------- LAZARD INTERNATIONAL FIXED-INCOME PORTFOLIO (CONTINUED) Household Finance Corp., 6.25%, 04/30/07 .......................... FRF 2,200 $ 324,365 International Business Machines Corp., 0.90%, 04/14/03 .......................... JPY 72,000 629,811 Level 3 Communications, Inc., 11.25%, 03/15/10 ......................... EUR 145 115,732 MBNA American Europe: 5.125%, 04/19/08 (f) ..................... DEM 1,880 876,689 6.00%, 05/21/07 (f) ...................... NLG 3,800 1,667,294 Merrill Lynch & Co., Inc.: 5.375%, 01/04/09 (f) ..................... DEM 830 383,542 7.375%, 12/17/07 ......................... GBP 231 365,535 NTL Communications Corp., Series B: 0.00%, 11/15/09 (g) ...................... EUR 50 24,001 9.25%, 11/15/06 .......................... EUR 255 210,711 Resolution Funding Corp. STRIP, 0.00%, 01/15/21 .............................. 824 251,089 United States Treasury Notes: 6.00%, 08/15/09 .............................. 100 105,516 6.50%, 03/31/02 .............................. 900 911,250 7.50%, 02/15/05 .............................. 341 370,783 ----------- TOTAL UNITED STATES ........................... 14,870,668 ----------- TOTAL CURRENCY DENOMINATED BONDS (Identified cost $78,359,095) ................. 77,815,082 ----------- SHARES ------- PREFERRED STOCKS--0.0% UNITED KINGDOM--0.0% Avecia Group PLC (Identified cost $9,422) (a) .................. 378 10,206 ----------- WARRANTS--0.0% CANADA--0.0% Cable Satisfaction International, Inc., 03/01/05 (a) ............ 170 1,700 ----------- NORWAY--0.0% Enitel ASA, 04/05/05 (a), (d) ................. 65 15 ----------- TOTAL WARRANTS (Identified cost $7,308) ...................... 1,715 ----------- PRINCIPAL AMOUNT (000) ------- DISCOUNT NOTES--8.0% Federal Home Loan Bank: 5.38%, 12/21/01 .............................. $ 100 94,725 5.55%, 12/10/01 .............................. 150 142,068 5.76%, 06/20/01 ............................. 100 97,280 5.78%, 05/31/01 ............................. 195 190,304 5.80%, 06/27/01 ............................. 140 136,008 5.93%, 05/01/01 ............................. 100 98,023 5.94%, 01/12/01 ............................. 100 99,818 6.04%, 06/01/01 ............................. 100 97,467 6.05%, 06/01/01 ............................. 100 97,462 6.09%, 03/08/01 ............................. 170 168,102 6.11%, 03/13/01 ............................. 21 20,747 6.11%, 03/16/01 ............................. 43 42,460 6.17%, 01/16/01 ............................. 100 99,743 6.22%, 03/23/01 ............................. 45 44,370 6.34%, 02/07/01 ............................. 100 99,348 6.36%, 02/14/01 ............................. 100 99,223 6.38%, 01/24/01 ............................. 145 144,409 6.38%, 02/14/01 ............................. 134 132,955 6.39%, 02/02/01 ............................. 100 99,432 6.39%, 02/07/01 ............................. 100 99,343 6.41%, 01/05/01 ............................. 100 99,929 6.43%, 01/03/01 ............................. 132 131,953 Federal Home Loan Mortgage Corp.: 6.04%, 03/15/01 ............................. 495 488,937 6.17%, 03/15/01 ............................. 150 148,123 6.40%, 01/11/01 ............................. 120 119,787 6.40%, 01/18/01 ............................. 154 153,534 6.41%, 02/01/01 ............................. 100 99,449 6.44%, 01/16/01 ............................. 100 99,732 Federal National Mortgage Association: 5.45%, 12/14/01 ............................. 260 246,342 5.71%, 11/30/01 ............................. 242 229,218 5.82%, 06/07/01 ............................. 225 219,289 6.01%, 06/14/01 ............................. 137 133,249 6.04%, 06/07/01 ............................. 100 97,366 6.05%, 11/16/01 ............................. 293 277,292 6.12%, 02/20/01 ............................. 200 198,300 6.26%, 04/12/01 ............................. 100 98,244 6.31%, 02/20/01 ............................. 100 99,124 6.31%, 04/03/01 ............................. 100 98,387 6.31%, 08/10/01 ............................. 100 96,126 6.32%, 01/19/01 ............................. 150 149,526 6.33%, 02/07/01 ............................. 100 99,350 6.33%, 03/08/01 ............................. 21 20,756 6.33%, 07/27/01 ............................. 117 112,742 6.35%, 02/01/01 ............................. 79 78,568 6.36%, 02/06/01 ............................. 303 301,073 6.37%, 02/05/01 ............................. 100 99,381 6.40%, 02/15/01 ............................. 100 99,200 THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS. 44 ================================================================================ THE LAZARD FUNDS, INC. PORTFOLIO OF INVESTMENTS (CONTINUED) DECEMBER 31, 2000 -------------------------------------------------------------------------------- PRINCIPAL AMOUNT DESCRIPTION (000) VALUE ------- --------- LAZARD INTERNATIONAL FIXED-INCOME PORTFOLIO (CONTINUED) 6.41%, 01/08/01 ............................... $ 110 $ 109,863 6.41%, 01/25/01 ............................... 105 104,551 6.42%, 01/04/01 ............................... 200 199,893 6.42%, 07/11/01 ............................... 117 113,015 6.43%, 01/08/01 ............................... 100 99,875 6.44%, 01/10/01 ............................... 100 99,839 ----------- TOTAL DISCOUNT NOTES (Identified cost $6,925,300) .................. 6,925,300 ----------- TOTAL INVESTMENTS (Identified cost $85,301,125) (b) ............. 97.7% $84,752,303 CASH AND OTHER ASSETS IN EXCESS OF LIABILITIES ...................... 2.3 1,966,739 ------ ----------- NET ASSETS ..................................... 100.0% $86,719,042 ====== =========== THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS. 45 ================================================================================ THE LAZARD FUNDS, INC. PORTFOLIO OF INVESTMENTS (CONTINUED) DECEMBER 31, 2000 -------------------------------------------------------------------------------- LAZARD INTERNATIONAL FIXED-INCOME PORTFOLIO (CONTINUED) Forward Foreign Currency Contracts open at December 31, 2000:
Forward U.S. $ Cost U.S. $ Foreign Currency Expiration Foreign on Origination Current Unrealized Unrealized Purchase Contracts Date Currency Date Value Appreciation Depreciation -------------------- ------------ -------------- ---------------- ------------ -------------- ------------- ARS 2/6/01 306,182 $ 303,000 $ 305,479 $ 2,479 $ -- ARS 2/21/01 112,706 112,000 112,257 257 -- ARS 2/28/01 70,805 70,000 70,467 467 -- ARS 3/28/01 113,905 110,000 112,967 2,967 -- ARS 5/16/01 74,830 70,000 73,775 3,775 -- ARS 10/19/01 63,040 59,867 60,744 877 -- AUD 1/25/01 366,541 198,783 203,978 5,195 -- BRL 5/31/01 125,000 61,637 61,924 287 -- BRL 5/31/01 394,000 195,194 195,185 -- 9 BRL 12/5/01 238,539 111,000 113,829 2,829 -- CAD 1/26/01 1,539,821 1,025,624 1,026,930 1,306 -- CAD 1/26/01 1,600,373 1,065,233 1,067,314 2,081 -- CAD 1/26/01 393,677 261,000 262,549 1,549 -- CAD 1/26/01 121,592 80,000 81,092 1,092 -- CHF 1/26/01 910,295 533,490 562,938 29,448 -- CHF 1/26/01 150,058 88,000 92,798 4,798 -- CLP 1/4/01 76,560,000 132,000 133,392 1,392 -- CLP 5/14/01 43,937,400 78,000 75,800 -- 2,200 CLP 8/14/01 45,440,000 80,000 77,654 -- 2,346 CLP 9/28/01 78,071,000 133,000 132,740 -- 260 CLP 12/13/01 82,220,400 138,000 138,604 604 -- CNY 1/11/01 996,240 120,000 120,200 200 -- CNY 1/29/01 881,008 106,000 106,119 119 -- CNY 2/8/01 156,069 19,000 19,030 30 -- CNY 2/20/01 614,740 74,000 73,966 -- 34 CNY 3/5/01 149,553 18,000 17,982 -- 18 CNY 3/12/01 1,006,163 121,000 120,932 -- 68 CNY 3/20/01 1,407,669 169,000 169,112 112 -- COP 1/24/01 158,040,000 72,000 70,003 -- 1,997 CZK 2/5/01 3,451,812 87,000 91,862 4,862 -- CZK 2/7/01 3,543,000 89,960 94,292 4,332 -- CZK 2/7/01 2,915,000 77,389 77,579 190 -- CZK 2/14/01 616,000 15,884 16,396 512 -- CZK 2/20/01 595,000 15,397 15,839 442 -- CZK 2/22/01 2,840,000 79,032 75,604 -- 3,428 CZK 6/7/01 1,745,000 46,323 46,541 218 -- CZK 6/12/01 3,190,000 85,979 85,084 -- 895 CZK 6/17/01 4,395,000 116,919 117,221 302 -- DKK 1/26/01 788,565 93,000 99,374 6,374 -- DKK 1/26/01 5,470,860 639,934 689,435 49,501 -- DKK 1/26/01 1,014,127 118,000 127,800 9,800 -- DKK 1/26/01 21,672,417 2,442,788 2,731,145 288,357 -- EUR 1/26/01 31,772 27,635 29,871 2,236 -- EUR 1/26/01 55,353 49,297 52,042 2,745 -- EUR 1/26/01 40,873 36,293 38,428 2,135 -- EUR 1/26/01 64,377 56,825 60,526 3,701 -- EUR 1/26/01 2,215 1,952 2,082 130 -- EUR 1/26/01 41,188 36,225 38,724 2,499 --
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS. 46 ================================================================================ THE LAZARD FUNDS, INC. PORTFOLIO OF INVESTMENTS (CONTINUED) DECEMBER 31, 2000 -------------------------------------------------------------------------------- LAZARD INTERNATIONAL FIXED-INCOME PORTFOLIO (CONTINUED)
Forward U.S. $ Cost U.S. $ Foreign Currency Expiration Foreign on Origination Current Unrealized Unrealized Purchase Contracts Date Currency Date Value Appreciation Depreciation -------------------- ------------ ------------ ---------------- ------------- -------------- ------------- EUR 1/26/01 10,201,917 $8,954,325 $9,591,677 $637,352 $ -- EUR 1/26/01 4,126,124 3,622,448 3,879,315 256,867 -- EUR 1/26/01 618,307 542,101 581,322 39,221 -- EUR 1/26/01 393,347 343,376 369,819 26,443 -- EUR 1/26/01 34,446 30,204 32,386 2,182 -- EUR 1/26/01 8,940 7,839 8,405 566 -- EUR 1/26/01 78,909 68,992 74,189 5,197 -- EUR 1/26/01 3,239,305 2,810,000 3,045,542 235,542 -- EUR 1/26/01 18,021 15,668 16,943 1,275 -- EUR 1/26/01 28,749 24,981 27,030 2,049 -- EUR 1/26/01 226,471 193,388 212,925 19,537 -- EUR 1/26/01 35,372 30,750 33,257 2,507 -- EUR 1/26/01 217,299 185,767 204,301 18,534 -- EUR 1/26/01 176,869 147,000 166,289 19,289 -- EUR 1/26/01 63,759 52,981 59,946 6,965 -- EUR 1/26/01 12,888 10,749 12,117 1,368 -- EUR 1/26/01 116,377 98,131 109,416 11,285 -- EUR 1/26/01 47,524 40,487 44,681 4,194 -- EUR 1/26/01 139,651 119,064 131,298 12,234 -- EUR 1/26/01 765,078 666,000 719,313 53,313 -- EUR 1/26/01 184,086 160,000 173,074 13,074 -- EUR 1/26/01 114,451 99,000 107,605 8,605 -- EUR 1/26/01 273,086 236,165 256,751 20,586 -- EUR 1/26/01 91,528 78,408 86,053 7,645 -- EUR 1/26/01 6,076 5,199 5,713 514 -- EUR 1/26/01 98,240 84,000 92,364 8,364 -- EUR 1/26/01 46,455 39,499 43,676 4,177 -- EUR 1/26/01 57,171 49,120 53,751 4,631 -- EUR 1/26/01 99,387 87,000 93,442 6,442 -- EUR 1/26/01 332,689 292,194 312,789 20,595 -- EUR 1/26/01 2,713 2,381 2,550 169 -- EUR 1/26/01 117,975 104,104 110,918 6,814 -- EUR 1/26/01 156,364 136,787 147,011 10,224 -- EUR 1/26/01 41,872 36,772 39,367 2,595 -- EUR 1/26/01 142,875 125,556 134,329 8,773 -- EUR 1/26/01 237,707 213,093 223,489 10,396 -- EUR 1/26/01 249,678 227,457 234,743 7,286 -- EUR 1/26/01 38,477 35,271 36,175 904 -- EUR 3/9/01 38,347 33,951 36,113 2,162 -- EUR 3/20/01 169,679 151,337 159,862 8,525 -- EUR 6/12/01 49,211 42,567 46,490 3,923 -- GBP 1/26/01 375,751 554,000 562,159 8,159 -- GBP 1/26/01 131,038 190,325 196,045 5,720 -- GBP 1/26/01 43,494 63,171 65,072 1,901 -- GBP 1/26/01 26,365 37,544 39,445 1,901 -- GBP 1/26/01 70,872 100,000 106,031 6,031 -- GBP 1/26/01 81,000 115,440 121,184 5,744 -- GBP 1/26/01 97,680 140,000 146,138 6,138 -- GBP 1/26/01 16,589 24,179 24,819 640 --
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS. 47 ================================================================================ THE LAZARD FUNDS, INC. PORTFOLIO OF INVESTMENTS (CONTINUED) DECEMBER 31, 2000 -------------------------------------------------------------------------------- LAZARD INTERNATIONAL FIXED-INCOME PORTFOLIO (CONTINUED)
Forward U.S. $ Cost U.S. $ Foreign Currency Expiration Foreign on Origination Current Unrealized Unrealized Purchase Contracts Date Currency Date Value Appreciation Depreciation -------------------- ------------ -------------- ---------------- ------------ -------------- ------------- GBP 1/26/01 138,434 $ 201,887 $ 207,110 $5,223 $ -- GBP 1/26/01 5,114 7,413 7,652 239 -- GBP 1/26/01 4,853 7,157 7,260 103 -- GBP 1/26/01 126,931 187,541 189,901 2,360 -- HUF 3/12/01 5,287,000 17,503 18,557 1,054 -- HUF 6/5/01 25,773,160 83,000 89,355 6,355 -- HUF 8/6/01 33,656,220 117,000 115,652 -- 1,348 ILS 3/9/01 184,185 45,000 45,379 379 -- ILS 3/28/01 186,345 45,000 45,870 870 -- ILS 6/20/01 926,614 225,316 227,134 1,818 -- INR 1/10/01 3,960,600 84,000 84,425 425 -- INR 2/6/01 3,155,460 66,000 67,029 1,029 -- INR 2/12/01 2,609,750 55,000 55,370 370 -- INR 3/20/01 10,436,800 220,000 219,712 -- 288 JPY 1/26/01 8,484,800 80,000 74,540 -- 5,460 JPY 1/26/01 146,714,181 1,375,751 1,288,896 -- 86,855 JPY 1/26/01 17,693,800 165,309 155,440 -- 9,869 JPY 1/26/01 8,733,493 81,951 76,723 -- 5,228 JPY 1/26/01 193,006,509 1,810,364 1,695,578 -- 114,786 JPY 1/26/01 13,255,600 124,000 116,452 -- 7,548 JPY 1/26/01 1,889,094 17,713 16,596 -- 1,117 JPY 1/26/01 8,418,060 78,600 73,953 -- 4,647 JPY 1/26/01 317,942,592 3,008,000 2,793,151 -- 214,849 JPY 1/26/01 511,633 4,824 4,495 -- 329 JPY 1/26/01 2,035,850 19,000 17,885 -- 1,115 JPY 1/26/01 1,287,240 12,000 11,309 -- 691 JPY 1/26/01 5,747,304 54,375 50,491 -- 3,884 JPY 1/26/01 3,498,960 33,156 30,739 -- 2,417 JPY 1/26/01 11,497,680 108,000 101,008 -- 6,992 JPY 1/26/01 3,760,618 34,502 33,036 -- 1,466 JPY 1/26/01 41,572,000 380,000 365,213 -- 14,787 KES 1/8/01 1,360,000 17,132 17,362 230 -- KES 3/12/01 3,544,108 44,000 44,557 557 -- KES 3/22/01 2,761,693 35,000 34,626 -- 374 KRW 2/14/01 75,844,000 67,000 59,991 -- 7,009 KRW 2/20/01 63,728,000 56,000 50,403 -- 5,597 KRW 2/28/01 46,207,200 39,000 36,542 -- 2,458 KRW 3/20/01 289,440,000 240,000 228,834 -- 11,166 MXN 1/24/01 400,000 37,555 41,231 3,676 -- MXN 2/26/01 385,000 39,605 39,303 -- 302 MXN 4/16/01 286,796 28,000 28,856 856 -- MXN 4/16/01 592,342 59,000 59,598 598 -- MXN 6/22/01 970,220 96,998 95,758 -- 1,240 MXN 6/22/01 1,372,510 135,926 135,463 -- 463 MXN 12/19/01 1,868,850 180,000 175,852 -- 4,148 PEN 1/31/01 232,284 65,000 65,463 463 -- PEN 2/13/01 331,000 92,912 93,056 144 -- PEN 2/14/01 150,000 41,899 42,162 263 -- PEN 6/28/01 502,320 138,000 136,861 -- 1,139
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS. 48 ================================================================================ THE LAZARD FUNDS, INC. PORTFOLIO OF INVESTMENTS (CONTINUED) DECEMBER 31, 2000 -------------------------------------------------------------------------------- LAZARD INTERNATIONAL FIXED-INCOME PORTFOLIO (CONTINUED)
Forward U.S. $ Cost U.S. $ Foreign Currency Expiration Foreign on Origination Current Unrealized Unrealized Purchase Contracts Date Currency Date Value Appreciation Depreciation -------------------- ------------ -------------- ---------------- -------------- -------------- ------------- PHP 4/3/01 4,500,000 $ 75,000 $ 85,609 $ 10,609 $ -- PLN 1/10/01 1,115,000 244,947 268,811 23,864 -- PLN 3/12/01 778,855 170,000 183,861 13,861 -- PLN 3/21/01 1,035,000 230,538 243,669 13,131 -- PLN 6/7/01 385,564 82,000 88,573 6,573 -- PLN 10/3/01 674,576 133,000 149,781 16,781 -- PLN 11/20/01 1,505,874 293,000 329,945 36,945 -- PLN 12/7/01 654,720 132,000 142,785 10,785 -- SEK 1/26/01 947,212 96,000 100,538 4,538 -- SKK 1/24/01 4,254,000 82,027 89,814 7,787 -- SKK 3/9/01 1,700,000 38,104 35,831 -- 2,273 SKK 3/20/01 5,910,000 134,996 124,507 -- 10,489 SKK 3/20/01 1,600,000 36,551 33,707 -- 2,844 SKK 3/22/01 1,700,000 38,870 35,811 -- 3,059 SKK 5/22/01 2,033,000 39,996 42,709 2,713 -- SKK 6/8/01 4,960,000 100,010 104,122 4,112 -- SKK 6/14/01 6,846,000 137,913 143,680 5,767 -- SKK 12/18/01 3,920,375 79,000 81,498 2,498 -- SKK 12/21/01 2,333,760 46,900 48,507 1,607 -- SKK 12/27/01 3,590,000 72,876 74,596 1,720 -- TWD 1/19/01 2,227,000 68,000 66,873 -- 1,127 UYU 1/8/01 1,006,456 80,000 79,957 -- 43 UYU 2/2/01 608,880 48,000 47,747 -- 253 UYU 2/14/01 768,222 60,000 59,915 -- 85 VEB 1/5/01 56,295,000 80,393 80,223 -- 170 VEB 1/8/01 68,000,000 97,074 96,837 -- 237 VEB 1/19/01 120,050,000 171,072 170,529 -- 543 VEB 1/22/01 56,120,000 80,000 79,663 -- 337 VEB 1/31/01 56,240,000 80,000 79,668 -- 332 VEB 2/21/01 67,704,000 96,000 95,459 -- 541 VEB 2/22/01 34,594,000 49,000 48,764 -- 236 ----------- ----------- ---------- -------- Total Forward Foreign Currency Purchase Contracts $44,485,087 $46,112,752 $2,179,061 $551,396 =========== =========== ---------- --------
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS. 49 ================================================================================ THE LAZARD FUNDS, INC. PORTFOLIO OF INVESTMENTS (CONTINUED) DECEMBER 31, 2000 -------------------------------------------------------------------------------- LAZARD INTERNATIONAL FIXED-INCOME PORTFOLIO (CONTINUED)
Forward U.S. $ Cost U.S. $ Foreign Currency Expiration Foreign on Origination Current Unrealized Unrealized Sale Contracts Date Currency Date Value Appreciation Depreciation ------------------ ------------ ------------ ---------------- ------------ -------------- ------------- ARS 3/28/01 113,905 $ 110,373 $ 112,967 $ -- $ 2,594 ARS 5/16/01 74,830 71,883 73,775 -- 1,892 ARS 10/19/01 63,040 59,248 60,744 -- 1,496 BRL 5/31/01 399,955 205,000 198,135 6,865 -- CHF 1/26/01 98,001 57,240 60,605 -- 3,365 CZK 6/12/01 1,710,000 42,567 45,609 -- 3,042 DKK 1/26/01 16,048,897 1,898,649 2,022,472 -- 123,823 DKK 1/26/01 20,185,924 2,389,432 2,543,818 -- 154,386 DKK 1/26/01 6,855,276 798,053 863,898 -- 65,845 DKK 1/26/01 1,400,921 164,000 176,543 -- 12,543 EUR 1/24/01 97,018 82,027 91,206 -- 9,179 EUR 1/26/01 12,122 10,680 11,397 -- 717 EUR 1/26/01 71,476 62,838 67,200 -- 4,362 EUR 1/26/01 154,541 134,915 145,297 -- 10,382 EUR 1/26/01 2,881,388 2,497,962 2,709,034 -- 211,072 EUR 1/26/01 28,880 24,453 27,153 -- 2,700 EUR 1/26/01 14,912 12,625 14,020 -- 1,395 EUR 1/26/01 35,101 29,543 33,002 -- 3,459 EUR 1/26/01 2,777,366 2,332,987 2,611,234 -- 278,247 EUR 1/26/01 57,108 48,193 53,692 -- 5,499 EUR 1/26/01 171,197 148,000 160,957 -- 12,957 EUR 1/26/01 9,924 8,598 9,330 -- 732 EUR 1/26/01 210,125 182,363 197,556 -- 15,193 EUR 1/26/01 20,881 18,139 19,632 -- 1,493 EUR 1/26/01 68,916 59,385 64,794 -- 5,409 EUR 1/26/01 193,444 164,543 181,873 -- 17,330 EUR 1/26/01 75,392 64,128 70,882 -- 6,754 EUR 1/26/01 774,245 655,011 727,932 -- 72,921 EUR 1/26/01 301,722 257,418 283,675 -- 26,257 EUR 1/26/01 4,781 4,105 4,495 -- 390 EUR 1/26/01 95,352 83,147 89,649 -- 6,502 EUR 1/26/01 22,707 19,827 21,348 -- 1,521 EUR 1/26/01 89,596 79,654 84,237 -- 4,583 EUR 1/26/01 93,871 83,699 88,256 -- 4,557 EUR 1/26/01 133,160 118,000 125,195 -- 7,195 EUR 1/26/01 104,345 91,692 98,104 -- 6,412 EUR 1/26/01 23,563 20,684 22,153 -- 1,469 EUR 1/26/01 241,686 212,512 227,230 -- 14,718 EUR 1/26/01 31,274 27,453 29,404 -- 1,951 EUR 1/26/01 463 414 435 -- 21 EUR 1/26/01 23,190 20,800 21,803 -- 1,003 EUR 1/26/01 64,248 57,600 60,405 -- 2,805 EUR 1/26/01 231,726 211,000 217,865 -- 6,865 EUR 1/26/01 52,865 48,017 49,703 -- 1,686 EUR 1/26/01 315,536 286,980 296,662 -- 9,682 EUR 1/26/01 65,414 60,885 61,501 -- 616 EUR 1/26/01 91,019 78,549 85,574 -- 7,025 EUR 1/26/01 175,313 156,379 164,826 -- 8,447 EUR 1/26/01 51,204 45,642 48,141 -- 2,499 EUR 1/26/01 21,401 19,947 20,121 -- 174 EUR 2/5/01 99,531 87,000 93,618 -- 6,618 EUR 2/7/01 101,627 89,960 95,598 -- 5,638 EUR 2/7/01 83,133 77,389 78,201 -- 812 EUR 2/14/01 17,395 15,884 16,368 -- 484
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS. 50 ================================================================================ THE LAZARD FUNDS, INC. PORTFOLIO OF INVESTMENTS (CONTINUED) DECEMBER 31, 2000 -------------------------------------------------------------------------------- LAZARD INTERNATIONAL FIXED-INCOME PORTFOLIO (CONCLUDED)
Forward U.S. $ Cost U.S. $ Foreign Currency Expiration Foreign on Origination Current Unrealized Unrealized Sale Contracts Date Currency Date Value Appreciation Depreciation ------------------ ------------ ------------ ---------------- -------------- -------------- ------------- EUR 3/9/01 38,814 $ 38,104 $ 36,554 $ 1,550 $ -- EUR 3/20/01 136,034 134,996 128,163 6,833 -- EUR 3/20/01 36,832 36,551 34,701 1,850 -- EUR 3/22/01 39,089 38,870 36,831 2,039 -- EUR 6/7/01 48,149 46,323 45,479 844 -- EUR 6/8/01 112,523 100,010 106,288 -- 6,278 EUR 6/12/01 87,522 85,979 82,683 3,296 -- EUR 6/14/01 156,301 137,913 147,669 -- 9,756 EUR 12/18/01 88,150 79,000 83,762 -- 4,762 EUR 12/21/01 52,000 46,900 49,416 -- 2,516 EUR 12/27/01 79,566 72,876 75,626 -- 2,750 GBP 1/26/01 1,199,303 1,752,565 1,794,268 -- 41,703 GBP 1/26/01 367,929 537,890 550,456 -- 12,566 GBP 1/26/01 1,543,866 2,257,008 2,309,766 -- 52,758 GBP 1/26/01 39,372 56,990 58,904 -- 1,914 GBP 1/26/01 27,126 39,266 40,582 -- 1,316 GBP 1/26/01 363,024 534,389 543,117 -- 8,728 GBP 1/26/01 15,099 21,924 22,589 -- 665 GBP 1/26/01 235,000 337,672 351,582 -- 13,910 GBP 1/26/01 25,478 37,064 38,117 -- 1,053 GBP 1/26/01 62,731 90,000 93,851 -- 3,851 GBP 1/26/01 251,314 356,866 375,989 -- 19,123 GBP 1/26/01 241,630 345,000 361,502 -- 16,502 GBP 1/26/01 96,612 138,735 144,540 -- 5,805 GBP 1/26/01 38,979 56,388 58,316 -- 1,928 GBP 1/26/01 91,739 132,963 137,251 -- 4,288 ILS 3/9/01 82,684 20,000 20,372 -- 372 JPY 1/26/01 13,185,600 123,000 115,837 7,163 -- JPY 1/26/01 96,353,478 902,051 846,473 55,578 -- JPY 1/26/01 93,434,913 883,796 820,833 62,963 -- JPY 1/26/01 1,904,017 18,000 16,727 1,273 -- JPY 1/26/01 73,011,797 688,856 641,415 47,441 -- JPY 1/26/01 5,777,319 54,375 50,754 3,621 -- JPY 1/26/01 634,615 5,988 5,575 413 -- JPY 1/26/01 74,648,596 685,069 655,794 29,275 -- JPY 1/26/01 368,016 3,300 3,233 67 -- JPY 1/26/01 1,004,400 9,000 8,824 176 -- JPY 1/26/01 10,650,260 95,000 93,563 1,437 -- MXN 1/24/01 400,000 39,555 41,231 -- 1,676 PEN 2/14/01 150,000 41,690 42,162 -- 472 PLN 1/10/01 1,115,000 237,841 268,812 -- 30,971 PLN 3/12/01 315,810 66,000 74,552 -- 8,552 PLN 3/12/01 463,045 97,379 109,309 -- 11,930 PLN 3/21/01 142,376 29,000 33,520 -- 4,520 PLN 3/21/01 892,625 187,165 210,151 -- 22,986 SEK 1/26/01 3,071,823 318,076 326,046 -- 7,970 SEK 1/26/01 6,376,794 661,322 676,840 -- 15,518 SEK 1/26/01 2,903,664 300,976 308,198 -- 7,222 SKK 3/9/01 1,700,000 33,951 35,831 -- 1,880 SKK 3/20/01 7,510,000 151,337 158,215 -- 6,878 ----------- ----------- ---------- ---------- Total Forward Foreign Currency Sale Contracts $27,752,441 $29,011,593 232,684 1,491,836 =========== =========== ---------- ---------- Gross unrealized appreciation/depreciation from Forward Foreign Currency Contracts $2,411,745 $2,043,232 ========== ==========
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS. 51 ================================================================================ THE LAZARD FUNDS, INC. PORTFOLIO OF INVESTMENTS (CONTINUED) DECEMBER 31, 2000 -------------------------------------------------------------------------------- PRINCIPAL AMOUNT DESCRIPTION (000) VALUE -------------------------------------------------------------------------------- LAZARD STRATEGIC YIELD PORTFOLIO CURRENCY DENOMINATED BONDS--63.8% ARGENTINA--0.4% Citibank ARS Linked Time Deposit, 13.00%, 01/22/01 (i) ..................... USD 968 $ 972,356 ----------- BRAZIL--2.2% Deutsche Bank LTN Linked Notes: 19.30%, 03/01/01 (f), (i) ................ USD 2,985 3,133,951 17.40%, 08/01/01 (i) ..................... USD 430 426,130 17.18%, 08/01/01 (i) ..................... USD 940 927,968 Salomon, Inc. Linked Brazil Inflation Indexed Note, 6.00%, 12/02/02 (d), (i) ................. USD 895 872,178 ----------- TOTAL BRAZIL ............................. 5,360,227 ----------- CANADA--0.8% 360 Networks, Inc., 13.00%, 05/01/08 ......................... USD 195 156,000 Argos Funding Trust, 5.9625%, 02/27/06 (d), (f) ................... 1,000 647,204 Cable Satisfaction International, Inc., 12.75%, 03/01/10 ......................... USD 540 286,200 Dynacare, Inc., 10.75%, 01/15/06 (f) ..................... USD 797 749,180 GT Group Telecom, Inc., 0.00%, 02/01/10 (g) ...................... USD 775 255,750 ----------- TOTAL CANADA .................................. 2,094,334 ----------- COSTA RICA--0.7% Citibank CRC Linked Time Deposit: 13.75%, 01/22/01 (i) ..................... USD 766 771,898 14.50%, 01/18/01 (i) ..................... USD 55 55,982 Costa Rica Treasury Bill (B.E.M.), 12.80%, 01/10/01 (f), (i) .................... 300,000 933,318 ----------- TOTAL COSTA RICA .............................. 1,761,198 ----------- DENMARK--1.1% Nykredit AS, 6.00%, 10/01/29 (f) .......................... 12,456 1,503,141 Unikredit Realkredit, 7.00%, 07/01/29 (f) .......................... 10,128 1,268,750 ----------- TOTAL DENMARK ................................. 2,771,891 ----------- EL SALVADOR--0.5% Citibank SVC Linked Time Deposit, 8.50%, 02/06/01 (i) ...................... USD 1,178 1,194,845 ----------- GERMANY--1.1% Brokat Infosystems AG, 11.50%, 03/31/10 ......................... EUR 100 61,692 Callahan Nordrhein Westfalen, 14.00%, 07/15/10 (d) ..................... EUR 90 79,017 Core, Series 1998-1A, Class B3, 7.8531%, 01/16/06 (d), (f) ............... EUR 2,400 1,136,461 Ekabel Hessen GMBH, 14.50%, 09/01/10 (d) ..................... EUR 170 143,667 European Credit Card Offerings, Series B, 5.50%, 02/18/11 (f) .......................... 2,570 1,207,372 Grohe Holding GMBH, 11.50%, 11/15/10 (d) ..................... EUR 120 116,061 ----------- TOTAL GERMANY ................................. 2,744,270 ----------- GREECE--0.7% Republic of Hellenic, 7.72%, 08/14/03 (e), (f) ..................... 605,000 1,728,786 ----------- HUNGARY--3.0% Government of Hungary: 9.50%, 01/12/02 (f) .......................... 1,348,400 4,730,968 13.50%, 01/12/01 ............................. 192,000 682,155 13.50%, 11/24/01 (f) ......................... 575,800 2,083,992 ----------- TOTAL HUNGARY ................................. 7,497,115 ----------- INDONESIA--0.0% Polysindo, 0.00%, 04/26/03 (k) .......................... 5,000,000 5,168 PT Polysindo Eka Perkasa, 10.00%, 03/16/01 ......................... USD 194 1,942 ----------- TOTAL INDONESIA ............................... 7,110 ----------- IRELAND--0.4% Atlas Reinsurance PLC, Series B, 10.5044%, 04/04/03 (d), (e), (f) ......... USD 1,020 1,017,450 ----------- ITALY--0.6% Films PLC, 5.8869%, 03/31/05 (e), (f) ................... 4,420,000 1,393,282 ----------- JAPAN--1.0% Spires, Ltd., 2.48%, 01/23/02 (f) .......................... 286,282 2,524,250 ----------- LUXEMBOURG--0.0% PTC International Finance II SA, 11.25%, 12/01/09 ......................... EUR 45 36,191 ----------- MEXICO--0.7% Citibank MXN Linked Time Deposit, 22.75%, 12/03/01 (i) ..................... USD 815 1,006,199 THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS. 52 ================================================================================ THE LAZARD FUNDS, INC. PORTFOLIO OF INVESTMENTS (CONTINUED) DECEMBER 31, 2000 -------------------------------------------------------------------------------- PRINCIPAL AMOUNT DESCRIPTION (000) VALUE -------------------------------------------------------------------------------- LAZARD STRATEGIC YIELD PORTFOLIO (CONTINUED) United Mexican States: 9.875%, 01/15/07 ......................... USD 160 $ 169,200 Series D, 7.4475%, 12/31/19 (e) .......... USD 450 450,108 rights 01/03/03 ......................... USD 698 0 ----------- TOTAL MEXICO .................................. 1,625,507 ----------- NAMIBIA--0.1% Government of Namibia: 12.00%, 04/15/02 ......................... SAR 1,460 191,766 12.00%, 04/15/05 ......................... SAR 1,460 181,830 ----------- TOTAL NAMIBIA ................................. 373,596 ----------- NETHERLANDS--0.4% Completel Europe NV, Series B, 14.00%, 04/15/10 ......................... EUR 240 180,288 Flowserve Finance BV, 12.25%, 08/15/10 ......................... EUR 80 75,871 Jones Lang LaSalle Finance BV, 9.00%, 06/15/07 (d) ...................... EUR 45 43,819 Kappa Beheer BV: 0.00%, 07/15/09 (g) ...................... EUR 35 22,019 10.625%, 07/15/09 ........................ EUR 210 199,655 KPNQwest BV, 7.125%, 06/01/09 ......................... EUR 80 65,880 Tele1 Europe BV, 13.00%, 05/15/09 ......................... EUR 200 170,898 United Pan-Europe Communications NV, Series B: 0.00%, 11/01/09 (g) ...................... EUR 220 66,829 11.25%, 02/01/10 ......................... EUR 200 122,070 Versatel Telecom BV, 11.875%, 07/15/09 ........................ EUR 135 82,397 ----------- TOTAL NETHERLANDS ............................. 1,029,726 ----------- PANAMA--0.2% Republic of Panama, 7.75%, 07/17/16 (e) ...................... USD 799 607,898 ----------- PHILIPPINES--0.2% Republic of Philippines, 9.875%, 01/15/19 ......................... USD 516 410,220 ----------- SOUTH AFRICA--1.2% Lesotho Water: 12.00%, 12/01/05 (f) ......................... 5,700 741,716 12.50%, 04/15/02 (f) ......................... 8,590 1,146,544 13.00%, 09/15/10 (f) ......................... 6,080 798,566 Republic of South Africa, 12.00%, 02/28/05 ............................. 1,710 225,752 South African Roads, 11.50%, 09/30/05 ............................. 415 52,995 ----------- TOTAL SOUTH AFRICA ............................ 2,965,573 ----------- SOUTH KOREA--1.0% Salomon, Inc. MSB Linked Korea Currency Indexed Notes: 6.95%, 01/10/01 (d), (i) ................. USD 2,351 2,099,777 7.36%, 06/08/01 (d), (i) ................. USD 516 467,206 ----------- TOTAL SOUTH KOREA ............................. 2,566,983 ----------- SWEDEN--0.1% Alfa Laval Special Finance AB, 12.125%, 11/15/10 (d) .................... EUR 165 165,780 ----------- THAILAND--0.0% Finance One PLC: 0.00%, 08/28/97 (l) .................. 10,000 0 0.00%, 10/15/97 (l) .................. 10,000 0 Morgan Guarantee Trust, 0.00%, 07/31/01 (l) .................. 10,569 0 ----------- TOTAL THAILAND ................................ 0 ----------- TURKEY--0.4% Cellco Finance NV: 12.75%, 08/01/05 ......................... USD 150 141,000 15.00%, 08/01/05 (f) ..................... USD 905 879,650 ----------- TOTAL TURKEY .................................. 1,020,650 ----------- UNITED KINGDOM--1.3% Aes Drax Energy Ltd., 11.25%, 08/30/10 (d), (f) .................... 35 54,952 Avecia Group PLC, 11.00%, 07/01/09 (f) ..................... USD 335 330,812 Colt Telecom Group PLC, 7.625%, 07/31/08 ......................... DEM 450 196,062 Coral Group Holdings PLC, Series B, 13.50%, 09/30/09 (f) ......................... 65 95,251 Diamond Holdings PLC, 10.00%, 02/01/08 ............................. 95 113,643 Energis PLC, 9.50%, 06/15/09 .............................. 110 151,324 Gala Group Holdings PLC, 12.00%, 06/01/10 (d), (f) .................... 95 145,463 IPC Magazines Group PLC: 0.00%, 03/15/08 (g) .......................... 190 158,390 9.625%, 03/15/08 ............................. 165 199,847 Jazztel PLC: 14.00%, 04/01/09 ......................... EUR 150 93,665 14.00%, 07/15/10 ......................... EUR 345 217,050 Luxfer Holdings PLC, 10.125%, 05/01/09 ............................ 280 397,750 Ono Finance PLC: 14.00%, 07/15/10 (f) ..................... EUR 30 23,099 14.00%, 07/15/10 (d), (f) ................ EUR 235 172,229 THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS. 53 ================================================================================ THE LAZARD FUNDS, INC. PORTFOLIO OF INVESTMENTS (CONTINUED) DECEMBER 31, 2000 -------------------------------------------------------------------------------- PRINCIPAL AMOUNT DESCRIPTION (000) VALUE -------------------------------------------------------------------------------- LAZARD STRATEGIC YIELD PORTFOLIO (CONTINUED) Regional Independent Media: 0.00%, 07/01/08 (g) .......................... 150 $ 174,950 10.50%, 07/01/08 ......................... USD 125 125,025 Telewest PLC, 0.00%, 04/15/09 (g) .......................... 510 354,610 TM Group Holdings PLC, 11.00%, 05/15/08 ......................... USD 130 111,800 ----------- TOTAL UNITED KINGDOM .......................... 3,115,922 ----------- UNITED STATES--45.7% Adelphia Communications Corp., 9.375%, 11/15/09 (f) ......................... 272 239,360 Advanta Business Card Master Trust: Series 2000-B, Class A, 6.8563%, 01/20/06 (e), (f) ................... 1,500 1,503,319 Series 2000-B, Class C, 7.9363%, 01/20/06 (e), (f) ................... 2,280 2,281,779 Advanta Credit Card Master Trust, Series 1996-E, Class B, 6.95%, 05/15/04 (e) .......................... 1,100 1,099,307 Advantica Restaurant Group, Inc., 11.25%, 01/15/08 (f) ......................... 160 74,000 AES Corp., 9.375%, 09/15/10 ............................. 715 731,088 Agrilink Foods, Inc., 11.875%, 11/01/08 (f) ........................ 600 391,500 Allied Waste North America, Inc., Series B, 10.00%, 08/01/09 (f) ......................... 815 768,138 Alpha Wind 2000 Ltd. Series A, 11.31%, 05/23/01 (d), (e) .................... 425 429,250 American Express Credit Account Master Trust: Series 2000-2, Class A, 6.875%, 09/17/07 (e), (f) .................... 1,400 1,403,976 Series 2000-5, Class B, 7.09%, 04/15/08 (e), (f) ..................... 3,170 3,168,514 Amtrol, Inc., 10.625%, 12/31/06 (f) ........................ 60 47,700 ARCO Chemical Co., 9.80%, 02/01/20 (f) .......................... 435 411,209 Asset Securitization Corp., Series 1996-D2, Class ACS2, 1.5973%, 02/14/29 (e), (f), (j) .............. 7,035 438,588 BA Master Credit Card Trust, Series 1996-A, Class A, 6.84%, 08/15/03 (e) .......................... 1,625 1,625,504 Banc of America Large Loan, Series 2000-WSFA: Class A, 7.17%, 05/12/05 (d), (e), (f) ....... 735 735,459 Class D, 8.67%, 05/12/05 (d), (e), (f) ....... 1,700 1,701,063 Buhrmann US, Inc., 12.25%, 11/01/09 ............................. 365 366,825 Building One Services Corp., 10.50%, 05/01/09 (f) ......................... 1,080 648,000 Calpine Corp., 8.75%, 07/15/07 .............................. 330 328,152 Capital One Master Trust: Series 1996-2, Class A, 6.81%, 02/15/05 (e) .......................... 3,640 3,641,128 Series 1999-3, Class A, 6.96%, 09/15/09 (e) .......................... 1,400 1,406,524 Carco Auto Loan Master Trust, Series 1999-2, Class A1, 6.78%, 05/17/04 (e), (f) ..................... 1,360 1,359,575 Charter Communications Holdings LLC, 8.625%, 04/01/09 ............................. 210 189,000 Chase Credit Card Master Trust: Series 2000-2, Class A, 6.81%, 07/15/05 (e), (f) ..................... 2,170 2,170,673 Series 2000-2, Class C, 7.39%, 07/15/05 (e), (f) ..................... 4,925 4,888,062 Chesapeake Energy Corp., Series B, 9.625%, 05/01/05 (f) ......................... 340 350,200 Citibank Credit Card Issuance Trust, Series 2000-C2, Class C2, 7.31%, 10/15/07 (e), (f) ..................... 4,700 4,676,500 Citibank Credit Card Master Trust I, Series 1999-3, Class A, 6.65%, 03/15/04 (e), (f) ..................... 1,200 1,200,372 Colo.com, 13.875%, 03/15/10 (d), (f) ................... 365 229,950 Comstock Resources, Inc., 11.25%, 05/01/07 (f) ......................... 399 413,963 Corning, Inc., 5.625%, 02/18/05 (d), (f) ................ EUR 680 637,881 Courtyard by Marriott II, Ltd., Series B, 10.75%, 02/01/08 (f) ......................... 670 676,700 Crown Castle International Corp., 10.75%, 08/01/11 ............................. 360 369,000 Discover Card Master Trust I: Series 1998-1, Class A, 6.80%, 08/18/03 (e), (f) ..................... 2,675 2,675,000 THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS. 54 ================================================================================ THE LAZARD FUNDS, INC. PORTFOLIO OF INVESTMENTS (CONTINUED) DECEMBER 31, 2000 -------------------------------------------------------------------------------- PRINCIPAL AMOUNT DESCRIPTION (000) VALUE -------------------------------------------------------------------------------- LAZARD STRATEGIC YIELD PORTFOLIO (CONTINUED) Series 2000-3, Class A, 6.83%, 09/16/05 (e), (f) ..................... 1,470 $ 1,470,911 Series 1999-5, Class A, 6.89%, 12/18/06 (e), (f) ..................... 1,270 1,273,175 Series 1996-2, Class A, 6.93%, 07/18/05 (e), (f) ..................... 2,355 2,360,134 Series 2000-6, Class B, 6.98%, 01/15/08 (e) .......................... 2,445 2,437,740 Echostar Broadband Corp., 10.375%, 10/01/07 ............................ 240 235,800 Echostar DBS Corp., 9.375%, 02/01/09 (f) ......................... 233 226,010 Exodus Communications, Inc.: 11.375%, 07/15/08 ........................ EUR 210 178,457 11.625%, 07/15/10 (d) ........................ 300 269,250 First Union Master Credit Card Trust, Series 1996-1, Class A, 6.88%, 09/15/03 (e), (f) ..................... 4,505 4,505,000 First USA Credit Card Master Trust: Series 1998-1, Class C, 6.50%, 01/18/06 (d), (f) ..................... 1,600 1,599,824 Series 1998-1, Class A, 6.7788%, 01/18/06 (e), (f) ................... 1,455 1,455,000 Series 1996-6, Class A, 6.8675%, 07/10/06 (e), (f) ................... 850 851,063 Series 1996-6, Class B, 7.0775%, 07/10/06 (e), (f) ................... 2,225 2,222,908 Foamex LP: 9.875%, 06/15/07 (f) ......................... 435 239,250 13.50%, 08/15/05 (f) ......................... 295 177,000 Geo Specialty Chemicals, Inc., 10.125%, 08/01/08 (f) ........................ 245 205,800 Globix Corp., 12.50%, 02/01/10 ............................. 240 88,800 Hanger Orthopedic Group, Inc., 11.25%, 06/15/09 (f) ......................... 300 96,000 HCA-The Healthcare Co., 8.75%, 11/01/10 .......................... GBP 190 296,892 HEALTHSOUTH Corp., 10.75%, 10/01/08 (d) ......................... 605 632,225 High Voltage Engineering Corp., 10.50%, 08/15/04 (f) ......................... 454 295,100 Holley Performance Products, Inc., Series B, 12.25%, 09/15/07 (f) ......................... 1,000 530,000 Hyperion Telecommunications, Inc., 12.00%, 11/01/07 (f) ......................... 615 233,700 Interpool Capital Trust, Series B, 9.875%, 02/15/27 (f) ......................... 1,370 780,900 IT Group, Inc., Series B, 11.25%, 04/01/09 (f) ......................... 1,225 955,500 ITC DeltaCom, Inc.: 9.75%, 11/15/08 (f) .......................... 180 136,800 11.00%, 06/01/07 (f) ......................... 295 236,000 John Q. Hammons Hotels, 8.875%, 02/15/04 ............................. 555 502,275 Kelvin 2nd Event, 8.70%, 02/14/03 (d) .......................... 600 601,500 Level 3 Communications, Inc.: 11.00%, 03/15/08 ............................. 325 286,000 11.25%, 03/15/10 ......................... EUR 545 464,091 LodgeNet Entertainment Corp., 10.25%, 12/15/06 (f) ......................... 510 479,400 Lodgian Financing Corp., 12.25%, 07/15/09 (f) ......................... 610 549,000 Lomak Petroleum Corp., 8.75%, 01/15/07 .............................. 180 169,650 Lyondell Chemical Co., 10.875%, 05/01/09 (f) ........................ 275 258,500 Mandalay Resort Group, Series B, 10.25%, 08/01/07 ............................. 520 513,500 MBNA Master Credit Card Trust: Series 2000-C, Class B, 6.995%, 07/15/07 (e), (f) .................... 2,525 2,521,036 Series 1994-C, Class B, 7.1375%, 03/15/04 (e), (f) ................... 2,845 2,851,373 Series 1999-E, Class C, 7.41%, 06/15/04 (e), (f) ..................... 5,670 5,670,000 Merrill Corp., Series B, 12.00%, 05/01/09 (f) ......................... 364 163,800 Merrill Lynch Mortgage Investors, Inc., Series 1996-C1, Class IO, 0.5966%, 04/25/28 (d), (e), (f), (j) ......... 15,659 327,865 Metromedia Fiber Network, Inc.: 10.00%, 12/15/09 ............................. 95 78,850 Series B, 10.00%, 11/15/08 (f) ............... 361 300,533 MGM Grand, Inc., 9.75%, 06/01/07 (f) .......................... 875 916,562 Morgan Stanley Capital I, Inc., Series 1996-WF1, Class X, 1.3677%, 01/15/13 (d), (e), (f), (j) ......... 5,778 278,973 Motors & Gears, Inc., Series D, 10.75%, 11/15/06 ............................. 470 418,300 Namazu Re Ltd., 11.215%, 12/02/04 (d), (e), (f) .............. 1,000 984,375 THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS. 55 ================================================================================ THE LAZARD FUNDS, INC. PORTFOLIO OF INVESTMENTS (CONTINUED) DECEMBER 31, 2000 -------------------------------------------------------------------------------- PRINCIPAL AMOUNT DESCRIPTION (000) VALUE -------------------------------------------------------------------------------- LAZARD STRATEGIC YIELD PORTFOLIO (CONTINUED) National City Credit Card Master Trust: Series 2000-1, Class A, 6.86%, 08/15/07 (e) .......................... 1,900 $ 1,901,055 Series 2000-1, Class C, 7.59%, 08/15/07 (e) .......................... 1,940 1,939,980 Neff Corp., 10.25%, 06/01/08 (f) ......................... 850 374,000 Nextel International, Inc., 12.75%, 08/01/10 (d) ......................... 485 397,700 North American Van Lines, Inc., 13.375%, 12/01/09 (d), (f) ................... 1,440 1,180,800 NTL Communications Corp., Series B: 0.00%, 11/15/09 (g) ...................... EUR 150 72,003 9.25%, 11/15/06 .......................... EUR 635 524,713 Orion Power Holdings, Inc., 12.00%, 05/01/10 (d), (f) .................... 480 520,800 Orius Capital Corp., Series B, 12.75%, 02/01/10 ............................. 830 688,900 Pacific Reinsurance Ltd., 10.4488%, 05/31/03 (e), (f) .................. 1,340 1,345,862 Penhall International Corp., 12.00%, 08/01/06 (f) ......................... 500 455,000 Petro Stopping Centers, 10.50%, 02/01/07 (f) ......................... 520 429,000 Phoenix Color Corp., 10.375%, 02/01/09 (f) ........................ 465 330,150 Plains Resources, Inc., 10.25%, 03/15/06 (d), (f) .................... 185 184,538 Prime Capital Hurricane Hydrocarbons, 12.914%, 01/17/04 (e) ........................ 875 875,000 Prime Capital Quake and Euro Wind, 13.914%, 01/17/04 ............................ 840 840,000 Prudential Home Mortgage Securities: Series 1993-24, Class A7, 0.55%, 07/25/25 (e), (j) ..................... 219 0 Series 1993-5, Class A9, 0.91%, 03/25/10 (e), (j) ..................... 585 0 Series 1993-41, Class A5, 0.92%, 10/25/10 (e), (j) ..................... 152 0 PSINet, Inc., 10.50%, 12/01/06 ............................. 120 31,200 RailWorks Corp., 11.50%, 04/15/09 (f) ......................... 730 262,800 RBF Finance Co., 11.00%, 03/15/06 (f) ......................... 605 700,288 Renters Choice, Inc., 11.00%, 08/15/08 (f) ......................... 715 694,444 Residential Reinsurance, Series 2000, 10.8363%, 12/01/01 (d), (e) ................. 560 560,000 Sabreliner Corp., 11.00%, 06/15/08 (d), (f) ................... 720 580,500 Spectrasite Holdings, Inc., Series B, 0.00%, 03/15/10 (g) ......................... 595 303,450 Station Casinos, Inc., 10.125%, 03/15/06 (f) ....................... 900 927,000 Sterling Chemicals Holdings, Inc., 0.00%, 08/15/08 (g) ......................... 495 74,250 Sterling Chemicals, Inc., Series A, 11.25%, 04/01/07 ............................ 260 122,200 Structured Asset Securities Corp.: Series 1996-CFL, Class X2, 1.0568%, 02/25/28 (e), (j) .................. 1,244 18,663 Series 1996-CFL, Class X1, 1.5868%, 02/25/28 (e), (f), (j) ............. 2,862 171,766 Superior Wholesale Inventory Financing Trust, Series 1999-A, Class A1, 6.835%, 05/15/06 (e) ........................ 2,520 2,515,892 Tekni-Plex, Inc., Series B, 12.75%, 06/15/10 ............................ 280 224,000 Transdigm, Inc., 10.375%, 12/01/08 (f) ....................... 325 292,500 Travelcenters of America, Inc., 12.75%, 05/01/09 ............................ 245 237,650 Ubiquitel Operating Co., 0.00%, 04/15/10 (g) ......................... 1,047 418,800 United Rentals, Inc. Series B: 9.00%, 04/01/09 ............................. 25 18,750 9.25%, 01/15/09 (f) ......................... 750 570,000 United States Treasury Bill, 5.90%, 03/01/01 ............................. 110 108,936 United States Treasury STRIP, 0.00%, 11/15/01 ............................. 600 572,124 URS Corp., Series B, 12.25%, 05/01/09 (f) ........................ 495 496,856 Wachovia Credit Card Master Trust, Series 1999-1, Class A, 6.77%, 08/15/06 (e), (f) .................... 5,100 5,110,404 Williams Communications Group, Inc., 10.875%, 10/01/09 (f) ....................... 410 305,450 WRC Media Corp., 12.75%, 11/15/09 ............................ 1,070 857,337 XO Communications, Inc., 10.75%, 06/01/09 (f) ........................ 520 426,400 ----------- TOTAL UNITED STATES .......................... 114,263,242 ----------- TOTAL CURRENCY DENOMINATED BONDS (Identified cost $171,056,307) ............... 159,248,402 ----------- THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS. 56 ================================================================================ THE LAZARD FUNDS, INC. PORTFOLIO OF INVESTMENTS (CONTINUED) DECEMBER 31, 2000 -------------------------------------------------------------------------------- DESCRIPTION SHARES VALUE -------------------------------------------------------------------------------- LAZARD STRATEGIC YIELD PORTFOLIO (CONTINUED) PREFERRED STOCKS--1.0% UNITED KINGDOM--0.0% Avecia Group PLC (a) .......................... 1,188 $ 32,076 ----------- UNITED STATES--1.0% Granite Broadcasting Corp. (a) ................ 898 116,740 Harborside Healthcare Corp. (a) ............... 1,344 28,224 High Voltage Engineering Corp., Series A (a) ................................. 1,857 960,998 Nextel Communications, Inc., Series E (a) ................................. 634 595,960 Paxson Communications Corp. (a) ............... 67 609,700 XO Communications, Inc. (a) ................... 2,537 73,573 ----------- TOTAL UNITED STATES ........................... 2,385,195 ----------- TOTAL PREFERRED STOCKS (Identified cost $5,208,902) .................. 2,417,271 ----------- WARRANTS--0.0% CANADA--0.0% Cable Satisfaction International, Inc., 03/01/05 (a) ................................. 540 5,400 GT Group Telecom, Inc., Class B, 02/01/10 (a), (d) ............................ 775 33,712 ----------- TOTAL CANADA .................................. 39,112 ----------- NORWAY--0.0% Enitel ASA, 04/05/05 (a), (d) ................. 100 23 ----------- UNITED KINGDOM--0.0% Ono Finance PLC, 05/31/09 (a) ................. 350 19,719 Ono Finance PLC, 05/31/09 (a), (d) ............ 90 5,071 ----------- TOTAL UNITED KINGDOM .......................... 24,790 ----------- UNITED STATES--0.0% Merrill Corp., Class B, 05/01/09 (a), (d) .......................................... 364 4 Motient Corp., 04/01/08 (a), (d) .............. 1,385 13,850 Ubiquitel Operating Co., 04/15/10 (a), (d) ..................................... 922 18,440 ----------- TOTAL UNITED STATES ........................... 32,294 ----------- TOTAL WARRANTS (Identified cost $72,337) ..................... 96,219 ----------- PRINCIPAL AMOUNT (000) ------- DISCOUNT NOTES--33.4% Federal Farm Credit Bank, 6.69%, 05/08/01 .............................. $ 100 $ 97,640 Federal Home Loan Bank: 5.36%, 12/21/01 .............................. 550 521,011 5.38%, 12/21/01 .............................. 796 754,008 5.55%, 12/10/01 .............................. 1,500 1,420,681 5.78%, 05/31/01 .............................. 2,229 2,175,318 5.80%, 06/27/01 .............................. 1,550 1,505,795 5.93%, 05/01/01 .............................. 494 484,235 6.04%, 06/01/01 .............................. 2,281 2,223,212 6.09%, 02/16/01 .............................. 100 99,222 6.09%, 03/08/01 .............................. 371 366,858 6.11%, 03/13/01 .............................. 164 162,024 6.11%, 03/16/01 .............................. 198 195,513 6.15%, 04/09/01 .............................. 2,050 2,015,680 6.16%, 01/17/01 .............................. 9,700 9,673,442 6.17%, 01/16/01 .............................. 990 987,455 6.22%, 03/09/01 .............................. 510 504,096 6.22%, 03/23/01 .............................. 584 575,827 6.26%, 05/18/01 .............................. 103 100,546 6.27%, 03/19/01 .............................. 2,000 1,973,178 6.32%, 02/06/01 .............................. 1,080 1,073,174 6.34%, 02/07/01 .............................. 918 912,018 6.34%, 03/06/01 .............................. 300 296,619 6.35%, 02/28/01 .............................. 1,350 1,336,189 6.36%, 02/14/01 .............................. 178 176,616 6.36%, 02/28/01 .............................. 475 470,137 6.38%, 01/24/01 .............................. 1,687 1,680,124 6.38%, 02/14/01 .............................. 1,889 1,874,270 6.38%, 02/16/01 .............................. 125 123,981 6.39%, 02/02/01 .............................. 696 692,047 6.39%, 02/07/01 .............................. 652 647,718 6.41%, 01/05/01 .............................. 998 997,289 6.43%, 01/03/01 .............................. 748 747,733 6.51%, 06/04/01 .............................. 1,442 1,401,843 Federal Home Loan Mortgage Corp.: 6.04%, 03/15/01 .............................. 3,405 3,363,296 6.06%, 02/01/01 .............................. 1,330 1,323,059 6.06%, 03/01/01 .............................. 465 460,382 6.09%, 10/11/01 .............................. 746 710,286 6.17%, 03/15/01 .............................. 1,700 1,678,731 6.40%, 01/11/01 .............................. 1,217 1,214,836 6.40%, 01/18/01 .............................. 1,644 1,639,032 6.41%, 02/01/01 .............................. 1,070 1,064,099 6.44%, 01/16/01 .............................. 642 640,277 6.44%, 02/01/01 .............................. 345 343,087 THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS. 57 ================================================================================ THE LAZARD FUNDS, INC. PORTFOLIO OF INVESTMENTS (CONTINUED) DECEMBER 31, 2000 -------------------------------------------------------------------------------- PRINCIPAL AMOUNT DESCRIPTION (000) VALUE -------------------------------------------------------------------------------- LAZARD STRATEGIC YIELD PORTFOLIO (CONTINUED) Federal National Mortgage Association: 5.45%, 12/14/01 .............................. $ 1,727 $ 1,636,277 5.71%, 11/30/01 .............................. 765 721,854 5.82%, 06/07/01 .............................. 3,090 3,011,571 6.01%, 06/14/01 .............................. 1,017 989,156 6.04%, 06/07/01 .............................. 2,550 2,482,830 6.05%, 11/16/01 .............................. 409 387,074 6.07%, 11/02/01 .............................. 2,405 2,281,320 6.12%, 02/20/01 .............................. 1,000 991,500 6.12%, 02/22/01 .............................. 1,569 1,555,130 6.13%, 09/27/01 .............................. 2,448 2,335,870 6.13%, 10/05/01 .............................. 100 95,287 6.26%, 04/12/01 .............................. 675 663,145 6.30%, 05/14/01 .............................. 1,285 1,255,092 6.31%, 02/20/01 .............................. 445 441,100 6.31%, 04/03/01 .............................. 660 649,357 6.31%, 08/10/01 .............................. 1,305 1,254,449 6.32%, 01/19/01 .............................. 2,000 1,993,680 6.33%, 02/07/01 .............................. 1,000 993,499 6.33%, 03/01/01 .............................. 318 314,701 6.33%, 03/08/01 .............................. 608 600,944 6.34%, 02/22/01 .............................. 505 500,375 6.35%, 02/01/01 .............................. 875 870,215 6.36%, 02/06/01 .............................. 540 536,566 6.36%, 02/08/01 .............................. 4 3,973 6.37%, 02/05/01 .............................. 570 566,470 6.38%, 02/08/01 .............................. 327 324,798 6.40%, 02/15/01 .............................. 660 654,720 6.41%, 01/08/01 .............................. 875 873,910 6.41%, 01/25/01 .............................. 1,400 1,394,017 6.42%, 07/11/01 .............................. 264 255,008 6.43%, 01/08/01 .............................. 966 964,792 6.44%, 01/10/01 .............................. 1,003 1,001,385 6.50%, 05/30/01 .............................. 92 89,525 ----------- TOTAL DISCOUNT NOTES (Identified cost $83,392,174) ................. 83,392,174 ----------- REPURCHASE AGREEMENT--0.0% State Street Bank and Trust Co., 5.80%, 01/02/01, (Dated 12/29/00, collateralized by $100,000 United States Treasury Note, 3.875%, 01/15/09, with a value of $108,938) (Identified cost $104,000) (f) ............... 104 104,000 ------------ TOTAL INVESTMENTS (Identified cost $259,833,720) (b) ............ 98.2% $245,258,066 CASH AND OTHER ASSETS IN EXCESS OF LIABILITIES ...................... 1.8 4,536,740 ----- ------------ NET ASSETS ..................................... 100.0% $249,794,806 ===== ============ THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS. 58 ================================================================================ THE LAZARD FUNDS, INC. PORTFOLIO OF INVESTMENTS (CONTINUED) DECEMBER 31, 2000 -------------------------------------------------------------------------------- LAZARD STRATEGIC YIELD PORTFOLIO (CONTINUED) Forward Foreign Currency Contracts open at December 31, 2000:
Forward U.S. $ Cost U.S. $ Foreign Currency Expiration Foreign on Origination Current Unrealized Unrealized Purchase Contracts Date Currency Date Value Appreciation Depreciation -------------------- ------------ ---------------- ---------------- ------------ -------------- ------------- ARS 1/24/01 60,780 $ 60,000 $ 60,725 $ 725 $ -- ARS 2/5/01 1,388,520 1,330,000 1,385,472 55,472 -- ARS 2/6/01 546,681 541,000 544,231 3,231 -- ARS 2/21/01 995,231 989,000 991,266 2,266 -- ARS 2/28/01 912,420 900,000 908,061 8,061 -- ARS 2/28/01 450,118 445,000 447,967 2,967 -- ARS 3/6/01 1,288,125 1,250,000 1,281,079 31,079 -- ARS 3/6/01 111,353 110,000 110,744 744 -- ARS 3/6/01 609,000 600,000 605,669 5,669 -- ARS 3/6/01 512,020 505,000 509,219 4,219 -- ARS 3/28/01 1,708,575 1,650,000 1,694,511 44,511 -- ARS 5/16/01 74,830 70,000 73,775 3,775 -- AUD 1/25/01 6,187,000 3,402,169 3,443,035 40,866 -- AUD 1/25/01 160,361 86,967 89,240 2,273 -- BRL 2/28/01 147,351 73,000 74,468 1,468 -- BRL 5/31/01 1,001,000 493,590 495,888 2,298 -- BRL 5/31/01 4,499,000 2,228,883 2,228,772 -- 111 BRL 12/5/01 1,646,134 766,000 785,519 19,519 -- CLP 1/4/01 433,840,000 748,000 755,887 7,887 -- CLP 5/14/01 721,868,950 1,281,500 1,245,353 -- 36,147 CLP 8/14/01 741,240,000 1,305,000 1,266,734 -- 38,266 CLP 9/28/01 852,911,000 1,453,000 1,450,158 -- 2,842 CLP 10/10/01 39,174,800 68,000 66,517 -- 1,483 CLP 12/13/01 909,786,600 1,527,000 1,533,685 6,685 -- CNY 1/11/01 10,103,534 1,217,000 1,219,026 2,026 -- CNY 1/29/01 11,635,960 1,400,000 1,401,568 1,568 -- CNY 2/8/01 965,050 116,000 116,184 184 -- CNY 2/20/01 9,785,999 1,178,000 1,177,461 -- 539 CNY 3/12/01 13,329,586 1,603,000 1,602,094 -- 906 CNY 3/20/01 13,701,863 1,645,000 1,646,087 1,087 -- COP 1/24/01 2,063,300,000 940,000 913,930 -- 26,070 CZK 2/5/01 13,075,000 344,505 347,961 3,456 -- CZK 2/5/01 22,535,968 568,000 599,743 31,743 -- CZK 2/7/01 36,140,000 917,632 961,819 44,187 -- CZK 2/7/01 26,065,000 691,985 693,686 1,701 -- CZK 2/14/01 12,685,000 327,085 337,639 10,554 -- CZK 2/15/01 765,000 20,990 20,363 -- 627 CZK 2/20/01 3,530,000 91,344 93,969 2,625 -- CZK 2/22/01 3,088,050 86,139 82,207 -- 3,932 CZK 6/7/01 62,780,000 1,666,578 1,674,392 7,814 -- CZK 6/12/01 75,810,000 2,043,286 2,022,002 -- 21,284 CZK 7/17/01 9,915,000 263,767 264,446 679 -- DKK 1/26/01 15,649,389 1,851,385 1,972,127 120,742 -- DKK 1/26/01 25,911,233 3,061,961 3,265,318 203,357 -- DKK 1/26/01 28,163,548 3,175,146 3,549,154 374,008 -- EUR 1/26/01 328,459 292,000 308,812 16,812 -- EUR 1/26/01 97,074 86,196 91,268 5,072 --
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS. 59 ================================================================================ THE LAZARD FUNDS, INC. PORTFOLIO OF INVESTMENTS (CONTINUED) DECEMBER 31, 2000 -------------------------------------------------------------------------------- LAZARD STRATEGIC YIELD PORTFOLIO (CONTINUED)
Forward U.S. $ Cost U.S. $ Foreign Currency Expiration Foreign on Origination Current Unrealized Unrealized Purchase Contracts Date Currency Date Value Appreciation Depreciation -------------------- ------------ ------------ ---------------- ------------ -------------- ------------- EUR 1/26/01 523,690 $ 465,000 $ 492,365 $ 27,365 $-- EUR 1/26/01 177,314 156,513 166,707 10,194 -- EUR 1/26/01 137,802 122,050 129,559 7,509 -- EUR 1/26/01 601,629 532,435 565,642 33,207 -- EUR 1/26/01 711,374 629,779 668,822 39,043 -- EUR 1/26/01 170,720 150,513 160,508 9,995 -- EUR 1/26/01 1,754,934 1,546,167 1,649,961 103,794 -- EUR 1/26/01 261,206 230,213 245,581 15,368 -- EUR 1/26/01 25,223 22,226 23,714 1,488 -- EUR 1/26/01 621,904 546,977 584,704 37,727 -- EUR 1/26/01 203,616 178,541 191,437 12,896 -- EUR 1/26/01 26,820 23,517 25,216 1,699 -- EUR 1/26/01 310,375 271,367 291,809 20,442 -- EUR 1/26/01 200,154 174,012 188,181 14,169 -- EUR 1/26/01 359,481 312,360 337,978 25,618 -- EUR 1/26/01 548,564 476,877 515,751 38,874 -- EUR 1/26/01 951,179 812,231 894,283 82,052 -- EUR 1/26/01 937,198 801,201 881,138 79,937 -- EUR 1/26/01 423,472 357,000 398,142 41,142 -- EUR 1/26/01 162,941 135,395 153,194 17,799 -- EUR 1/26/01 36,085 30,099 33,927 3,828 -- EUR 1/26/01 359,164 302,854 337,680 34,826 -- EUR 1/26/01 63,365 53,983 59,575 5,592 -- EUR 1/26/01 701,215 597,842 659,271 61,429 -- EUR 1/26/01 74,134 64,482 69,700 5,218 -- EUR 1/26/01 685,487 592,851 644,484 51,633 -- EUR 1/26/01 66,886 57,298 62,885 5,587 -- EUR 1/26/01 57,224 48,964 53,801 4,837 -- EUR 1/26/01 80,117 68,250 75,325 7,075 -- EUR 1/26/01 46,455 39,499 43,676 4,177 -- EUR 1/26/01 186,123 158,476 174,990 16,514 -- EUR 1/26/01 62,368 53,585 58,638 5,053 -- EUR 1/26/01 4,079,845 3,583,247 3,835,804 252,557 -- EUR 1/26/01 20,316 17,835 19,101 1,266 -- EUR 1/26/01 281,455 246,216 264,619 18,403 -- EUR 1/26/01 2,285,323 2,037,662 2,148,623 110,961 -- EUR 1/26/01 59,096 52,152 55,561 3,409 -- EUR 1/26/01 1,458,456 1,286,971 1,371,217 84,246 -- EUR 1/26/01 571,299 504,000 537,126 33,126 -- EUR 1/26/01 5,622,743 4,998,000 5,286,411 288,411 -- EUR 1/26/01 206,893 181,805 194,517 12,712 -- EUR 1/26/01 47,105 41,368 44,288 2,920 -- EUR 1/26/01 142,875 125,556 134,329 8,773 -- EUR 1/26/01 218,763 192,030 205,678 13,648 -- EUR 1/26/01 771,229 691,368 725,097 33,729 -- EUR 1/26/01 474,389 432,168 446,012 13,844 -- EUR 1/26/01 460,364 422,011 432,827 10,816 -- EUR 3/9/01 1,007,162 891,725 948,503 56,778 -- EUR 3/20/01 1,376,186 1,227,418 1,296,562 69,144 --
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS. 60 ================================================================================ THE LAZARD FUNDS, INC. PORTFOLIO OF INVESTMENTS (CONTINUED) DECEMBER 31, 2000 -------------------------------------------------------------------------------- LAZARD STRATEGIC YIELD PORTFOLIO (CONTINUED)
Forward U.S. $ Cost U.S. $ Foreign Currency Expiration Foreign on Origination Current Unrealized Unrealized Purchase Contracts Date Currency Date Value Appreciation Depreciation -------------------- ------------ -------------- ---------------- ------------ -------------- ------------- EUR 3/22/01 65,341 $ 58,185 $ 61,565 $ 3,380 $ -- EUR 6/12/01 702,514 607,672 663,671 55,999 -- GBP 1/26/01 26,941 39,666 40,306 640 -- GBP 1/26/01 321,229 469,419 480,589 11,170 -- GBP 1/26/01 2,753,467 4,025,403 4,119,442 94,039 -- GBP 1/26/01 284,458 413,816 425,576 11,760 -- GBP 1/26/01 151,198 219,605 226,206 6,601 -- GBP 1/26/01 101,487 147,400 151,834 4,434 -- GBP 1/26/01 100,051 142,072 149,685 7,613 -- GBP 1/26/01 116,062 165,409 173,639 8,230 -- GBP 1/26/01 204,132 295,300 305,401 10,101 -- GBP 1/26/01 145,015 211,359 216,956 5,597 -- GBP 1/26/01 256,517 374,096 383,773 9,677 -- GBP 1/26/01 15,343 22,238 22,955 717 -- GBP 1/26/01 135,875 200,398 203,282 2,884 -- GBP 1/26/01 132,450 195,695 198,157 2,462 -- HUF 10/15/01 233,100,000 745,586 793,071 47,485 -- ILS 2/15/01 2,775,000 676,170 684,391 8,221 -- ILS 2/28/01 1,915,000 469,823 472,024 2,201 -- ILS 3/9/01 4,870,670 1,190,000 1,200,027 10,027 -- ILS 3/28/01 2,443,190 590,000 601,401 11,401 -- ILS 4/10/01 340,000 82,685 83,641 956 -- ILS 6/20/01 4,082,000 992,584 1,000,588 8,004 -- ILS 6/21/01 6,446,400 1,569,536 1,580,077 10,541 -- INR 1/10/01 47,291,450 1,003,000 1,008,069 5,069 -- INR 2/6/01 51,156,700 1,070,000 1,086,686 16,686 -- INR 2/12/01 30,937,400 652,000 656,387 4,387 -- INR 2/12/01 764,000 16,000 16,209 209 -- INR 2/14/01 8,455,000 178,000 179,314 1,314 -- INR 3/20/01 92,508,000 1,950,000 1,947,447 -- 2,553 JPY 1/26/01 3,251,021 30,513 28,560 -- 1,953 JPY 1/26/01 15,474,030 144,942 135,941 -- 9,001 JPY 1/26/01 2,466,913 23,156 21,672 -- 1,484 JPY 1/26/01 140,401,542 1,316,557 1,233,439 -- 83,118 JPY 1/26/01 54,700,000 513,279 480,545 -- 32,734 JPY 1/26/01 28,016,225 262,693 246,125 -- 16,568 JPY 1/26/01 602,506,944 5,616,000 5,293,072 -- 322,928 JPY 1/26/01 104,486,760 975,600 917,925 -- 57,675 JPY 1/26/01 2,032,810 19,000 17,858 -- 1,142 JPY 1/26/01 3,016,794 28,529 26,503 -- 2,026 JPY 1/26/01 7,934,540 74,812 69,706 -- 5,106 JPY 1/26/01 5,123,079 48,404 45,007 -- 3,397 JPY 1/26/01 15,885,000 150,000 139,551 -- 10,449 JPY 1/26/01 28,823,350 269,000 253,215 -- 15,785 JPY 1/26/01 19,308,600 180,000 169,628 -- 10,372 JPY 1/26/01 69,539,202 657,905 610,907 -- 46,998 JPY 1/26/01 47,686,780 451,879 418,932 -- 32,947 JPY 1/26/01 44,963,914 412,521 395,012 -- 17,509 JPY 1/26/01 2,072,330 19,000 18,206 -- 794
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS. 61 ================================================================================ THE LAZARD FUNDS, INC. PORTFOLIO OF INVESTMENTS (CONTINUED) DECEMBER 31, 2000 -------------------------------------------------------------------------------- LAZARD STRATEGIC YIELD PORTFOLIO (CONTINUED)
Forward U.S. $ Cost U.S. $ Foreign Currency Expiration Foreign on Origination Current Unrealized Unrealized Purchase Contracts Date Currency Date Value Appreciation Depreciation -------------------- ------------ ---------------- ---------------- ------------ -------------- ------------- JPY 1/26/01 6,934,080 $ 62,000 $ 60,916 $ -- $ 1,084 KES 1/8/01 3,970,000 50,011 50,683 672 -- KES 3/12/01 41,079,429 510,000 516,454 6,454 -- KES 3/22/01 41,662,104 528,000 522,353 -- 5,647 KRW 1/5/01 113,030,000 100,000 89,422 -- 10,578 KRW 2/20/01 751,080,000 660,000 594,037 -- 65,963 KRW 2/28/01 444,300,000 375,000 351,364 -- 23,636 KRW 3/20/01 1,121,580,000 930,000 886,733 -- 43,267 MXN 1/24/01 9,700,000 910,713 999,845 89,132 -- MXN 2/15/01 8,891,850 850,000 910,490 60,490 -- MXN 4/16/01 20,997,535 2,050,000 2,112,641 62,641 -- MXN 4/16/01 6,776,798 675,000 681,839 6,839 -- MXN 6/22/01 1,445,303 143,135 142,647 -- 488 MXN 12/19/01 17,930,578 1,727,000 1,687,203 -- 39,797 MXN 2/4/02 7,153,500 600,000 664,558 64,558 -- PEN 1/31/01 2,823,144 790,000 795,633 5,633 -- PEN 2/13/01 3,607,000 1,012,491 1,014,057 1,566 -- PEN 2/14/01 4,020,000 1,122,905 1,129,944 7,039 -- PEN 6/27/01 5,640,915 1,550,000 1,537,243 -- 12,757 PHP 3/1/01 16,281,600 318,000 315,061 -- 2,939 PHP 4/3/01 39,600,000 660,000 753,360 93,360 -- PLN 1/10/01 1,345,000 295,475 324,261 28,786 -- PLN 3/2/01 8,360,000 1,819,171 1,979,452 160,281 -- PLN 3/6/01 5,005,000 1,100,000 1,183,642 83,642 -- PLN 3/12/01 5,062,558 1,105,000 1,195,098 90,098 -- PLN 3/21/01 1,415,000 315,180 333,134 17,954 -- PLN 6/7/01 10,725,262 2,281,000 2,463,845 182,845 -- PLN 10/2/01 11,671,073 2,315,000 2,592,139 277,139 -- PLN 11/16/01 12,351,436 2,404,500 2,709,246 304,746 -- PLN 11/20/01 2,102,056 409,000 460,571 51,571 -- SEK 1/16/01 2,200,752 228,235 233,590 5,355 -- SKK 1/24/01 33,394,567 643,923 705,050 61,127 -- SKK 3/9/01 44,650,000 1,000,784 941,104 -- 59,680 SKK 3/20/01 25,280,000 577,446 532,578 -- 44,868 SKK 3/20/01 35,630,000 813,953 750,624 -- 63,329 SKK 3/22/01 12,250,000 280,096 258,050 -- 22,046 SKK 5/22/01 12,403,000 244,009 260,562 16,553 -- SKK 6/5/01 7,005,000 141,049 147,069 6,020 -- SKK 6/8/01 42,920,000 865,410 900,992 35,582 -- SKK 6/11/01 87,280,000 1,779,046 1,831,993 52,947 -- SKK 6/14/01 50,497,024 1,017,265 1,059,800 42,535 -- SKK 6/15/01 26,110,360 527,471 547,966 20,495 -- SKK 12/21/01 27,287,040 548,373 567,163 18,790 -- SKK 12/27/01 39,203,000 795,806 814,587 18,781 -- TWD 1/19/01 21,025,500 642,000 631,364 -- 10,636 TWD 3/20/01 6,395,400 190,000 189,852 -- 148 UYU 1/8/01 12,152,956 966,000 965,478 -- 522 UYU 2/2/01 7,357,300 580,000 576,939 -- 3,061 UYU 2/14/01 9,103,431 711,000 709,991 -- 1,009
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS. 62 ================================================================================ THE LAZARD FUNDS, INC. PORTFOLIO OF INVESTMENTS (CONTINUED) DECEMBER 31, 2000 -------------------------------------------------------------------------------- LAZARD STRATEGIC YIELD PORTFOLIO (CONTINUED)
Forward U.S. $ Cost U.S. $ Foreign Currency Expiration Foreign on Origination Current Unrealized Unrealized Purchase Contracts Date Currency Date Value Appreciation Depreciation -------------------- ------------ ---------------- ---------------- --------------- -------------- ------------- VEB 1/5/01 669,142,500 $ 998,418 $ 996,314 $ -- $ 2,104 VEB 1/8/01 577,700,000 824,697 822,685 -- 2,012 VEB 1/19/01 1,485,950,000 2,117,492 2,110,763 -- 6,729 VEB 1/22/01 695,888,000 992,000 987,816 -- 4,184 VEB 1/31/01 630,591,000 897,000 893,294 -- 3,706 VEB 2/22/01 1,107,714,000 1,569,000 1,561,488 -- 7,512 ------------ ------------ ---------- ---------- Total Forward Foreign Currency Purchase Contracts $150,000,158 $153,903,306 $5,147,596 $1,244,448 ============ ============ ---------- ----------
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS. 63 ================================================================================ THE LAZARD FUNDS, INC. PORTFOLIO OF INVESTMENTS (CONTINUED) DECEMBER 31, 2000 -------------------------------------------------------------------------------- LAZARD STRATEGIC YIELD PORTFOLIO (CONTINUED)
Forward U.S. $ Cost U.S. $ Foreign Currency Expiration Foreign on Origination Current Unrealized Unrealized Sale Contracts Date Currency Date Value Appreciation Depreciation ------------------ ------------ ------------ ---------------- ------------- -------------- ------------- ARS 1/24/01 60,000 $ 59,815 $ 59,946 $ -- $ 131 ARS 2/5/01 380,000 378,373 379,166 -- 793 ARS 3/28/01 1,708,575 1,655,596 1,694,511 -- 38,915 AUD 1/25/01 5,465,104 2,963,179 3,041,303 -- 78,124 AUD 1/25/01 819,395 444,300 455,989 -- 11,689 BRL 5/31/01 3,072,825 1,575,000 1,522,256 52,744 -- CAD 1/26/01 835,936 556,411 557,499 -- 1,088 CZK 6/12/01 24,411,160 607,672 651,094 -- 43,422 DKK 1/26/01 91,370,611 10,815,650 11,514,471 -- 698,821 EUR 1/24/01 761,607 643,923 715,981 -- 72,058 EUR 1/26/01 141,031 123,988 132,595 -- 8,607 EUR 1/26/01 13,265,150 11,645,873 12,471,678 -- 825,805 EUR 1/26/01 20,633,866 18,090,742 19,399,625 -- 1,308,883 EUR 1/26/01 6,834,724 5,998,905 6,425,896 -- 426,991 EUR 1/26/01 18,298 16,000 17,203 -- 1,203 EUR 1/26/01 355,304 310,180 334,051 -- 23,871 EUR 1/26/01 316,234 267,730 297,318 -- 29,588 EUR 1/26/01 500,991 421,664 471,024 -- 49,360 EUR 1/26/01 285,919 240,000 268,816 -- 28,816 EUR 1/26/01 65,267 55,078 61,363 -- 6,285 EUR 1/26/01 35,976 30,439 33,824 -- 3,385 EUR 1/26/01 215,250 186,811 202,374 -- 15,563 EUR 1/26/01 266,305 231,326 250,375 -- 19,049 EUR 1/26/01 79,519 68,521 74,762 -- 6,241 EUR 1/26/01 34,037 29,180 32,001 -- 2,821 EUR 1/26/01 155,830 132,549 146,509 -- 13,960 EUR 1/26/01 75,392 64,128 70,882 -- 6,754 EUR 1/26/01 318,267 271,565 299,230 -- 27,665 EUR 1/26/01 5,063 4,347 4,759 -- 412 EUR 1/26/01 128,314 112,044 120,639 -- 8,595 EUR 1/26/01 84,939 75,514 79,859 -- 4,345 EUR 1/26/01 3,419,528 3,043,072 3,214,984 -- 171,912 EUR 1/26/01 1,404,954 1,245,000 1,320,915 -- 75,915 EUR 1/26/01 171,328 152,825 161,080 -- 8,255 EUR 1/26/01 260,136 228,361 244,576 -- 16,215 EUR 1/26/01 236,305 207,781 222,171 -- 14,390 EUR 1/26/01 450 402 423 -- 21 EUR 1/26/01 262,005 235,000 246,333 -- 11,333 EUR 1/26/01 714,989 641,000 672,211 -- 31,211 EUR 1/26/01 51,204 45,642 48,141 -- 2,499 EUR 1/26/01 257,952 234,607 242,522 -- 7,915 EUR 1/26/01 49,192 44,681 46,250 -- 1,569 EUR 1/26/01 298,768 274,000 280,897 -- 6,897 EUR 1/26/01 233,965 218,072 219,970 -- 1,898 EUR 1/26/01 65,414 60,885 61,501 -- 616 EUR 2/5/01 368,231 344,505 346,357 -- 1,852 EUR 2/5/01 649,809 568,000 611,208 -- 43,208 EUR 2/7/01 1,036,638 917,632 975,134 -- 57,502 EUR 2/7/01 743,353 691,985 699,250 -- 7,265
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS. 64 ================================================================================ THE LAZARD FUNDS, INC. PORTFOLIO OF INVESTMENTS (CONTINUED) DECEMBER 31, 2000 -------------------------------------------------------------------------------- LAZARD STRATEGIC YIELD PORTFOLIO (CONCLUDED)
Forward U.S. $ Cost U.S. $ Foreign Currency Expiration Foreign on Origination Current Unrealized Unrealized Sale Contracts Date Currency Date Value Appreciation Depreciation ------------------ ------------ -------------- ---------------- --------------- -------------- ------------- EUR 2/14/01 358,212 $ 327,085 $ 337,052 $ -- $ 9,967 EUR 2/15/01 20,894 20,990 19,660 1,330 -- EUR 2/22/01 85,000 86,139 80,004 6,135 -- EUR 3/9/01 1,019,444 1,000,785 960,069 40,716 -- EUR 3/20/01 581,885 577,446 548,218 29,228 -- EUR 3/20/01 820,212 813,953 772,755 41,198 -- EUR 3/22/01 281,674 280,096 265,396 14,700 -- EUR 6/5/01 159,950 141,049 151,072 -- 10,023 EUR 6/7/01 1,732,244 1,666,578 1,636,208 30,370 -- EUR 6/8/01 973,684 865,410 919,732 -- 54,322 EUR 6/11/01 1,977,121 1,779,046 1,867,746 -- 88,700 EUR 6/12/01 2,079,950 2,043,286 1,964,948 78,338 -- EUR 6/14/01 1,152,900 1,017,265 1,089,225 -- 71,960 EUR 6/15/01 595,339 527,471 562,476 -- 35,005 EUR 10/5/01 840,485 745,586 797,077 -- 51,491 EUR 12/21/01 608,000 548,373 577,787 -- 29,414 EUR 12/27/01 868,861 795,806 825,837 -- 30,031 GBP 1/26/01 6,047,065 8,840,326 9,046,971 -- 206,645 GBP 1/26/01 88,586 128,229 132,533 -- 4,304 GBP 1/26/01 54,251 78,531 81,165 -- 2,634 GBP 1/26/01 255,000 366,410 381,504 -- 15,094 GBP 1/26/01 101,697 146,037 152,148 -- 6,111 ILS 2/15/01 2,775,000 671,880 684,391 -- 12,511 ILS 2/28/01 1,264,545 306,000 311,695 -- 5,695 ILS 3/9/01 4,870,670 1,178,369 1,200,027 -- 21,658 JPY 1/26/01 866,974,647 8,132,055 7,616,442 515,613 -- JPY 1/26/01 204,256,848 1,908,318 1,794,412 113,906 -- JPY 1/26/01 4,139,850 39,000 36,369 2,631 -- JPY 1/26/01 29,829,593 282,000 262,055 19,945 -- JPY 1/26/01 3,158,595 29,700 27,749 1,951 -- JPY 1/26/01 581,310,912 5,432,000 5,106,863 325,137 -- JPY 1/26/01 69,902,366 657,905 614,098 43,807 -- JPY 1/26/01 8,093,390 76,360 71,101 5,259 -- JPY 1/26/01 4,697,653 43,042 41,269 1,773 -- JPY 1/26/01 4,047,476 36,928 35,557 1,371 -- JPY 1/26/01 8,293,360 75,504 72,858 2,646 -- JPY 1/26/01 4,081,632 36,600 35,857 743 -- JPY 1/26/01 10,936,800 98,000 96,081 1,919 -- JPY 1/26/01 8,231,260 72,753 72,312 441 -- MXN 1/24/01 9,700,000 939,467 999,845 -- 60,378 PEN 2/14/01 4,020,000 1,117,287 1,129,943 -- 12,656 PLN 1/10/01 1,345,000 286,903 324,261 -- 37,358 PLN 3/2/01 8,360,000 1,762,337 1,979,452 -- 217,115 PLN 3/6/01 1,572,970 322,000 371,995 -- 49,995 PLN 3/6/01 3,432,030 722,533 811,647 -- 89,114 PLN 3/12/01 4,761,075 995,000 1,123,928 -- 128,928 PLN 3/12/01 301,483 63,402 71,170 -- 7,768 PLN 3/21/01 1,415,000 296,695 333,134 -- 36,439 SEK 1/26/01 1,849,294 191,488 196,286 -- 4,798 SKK 3/9/01 44,650,000 891,725 941,104 -- 49,379 SKK 3/20/01 60,910,000 1,227,418 1,283,202 -- 55,784 SKK 3/22/01 2,894,100 58,185 60,965 -- 2,780 ------------ ------------ ---------- ---------- Total Forward Foreign Currency Sale Contracts $117,976,704 $122,276,573 1,331,901 5,631,770 ============ ============ ---------- ---------- Gross unrealized appreciation/depreciation from Forward Foreign Currency Contracts $6,479,497 $6,876,218 ========== ==========
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS. 65 ================================================================================ THE LAZARD FUNDS, INC. PORTFOLIO OF INVESTMENTS (CONCLUDED) DECEMBER 31, 2000 -------------------------------------------------------------------------------- PRINCIPAL AMOUNT DESCRIPTION (000) VALUE ---------------------------------------- ---------- ------------ LAZARD MORTGAGE PORTFOLIO MORTGAGE PASS-THROUGH SECURITIES--79.1% Federal Home Loan Mortgage Corp.: 6.50%, TBA 01/01 ............................. $37 $ 36,515 7.50%, TBA 01/01 ............................. 42 42,643 -------- TOTAL MORTGAGE PASS-THROUGH SECURITIES (Identified cost $79,116) .................... 79,158 -------- U.S. GOVERNMENT SECURITY--19.3% Federal Home Loan Mortgage Corp., 6.25%, 07/15/04 (Identified cost $19,332) (f) ................ 19 19,335 -------- DISCOUNT NOTE--78.7% Federal Home Loan Mortgage Corp., 6.22%, 01/23/01 (Identified cost $78,700) (f) ................ 79 78,700 -------- TOTAL INVESTMENTS (Identified cost $177,148) (b) ................ 177.1% $177,193 LIABILITIES IN EXCESS OF CASH AND OTHER ASSETS .................................. (77.1) (77,148) ----- -------- NET ASSETS ..................................... 100.0% $100,045 ===== ======== THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS. 66 ================================================================================ THE LAZARD FUNDS, INC. NOTES TO PORTFOLIOS OF INVESTMENTS DECEMBER 31, 2000 -------------------------------------------------------------------------------- (a) Non-income producing security. (b) For federal income tax purposes, the aggregate cost, aggregate gross unrealized appreciation, aggregate gross unrealized depreciation and the net unrealized appreciation (depreciation) is as follows:
AGGREGATE AGGREGATE NET GROSS GROSS UNREALIZED AGGREGATE UNREALIZED UNREALIZED APPRECIATION PORTFOLIO COST APPRECIATION DEPRECIATION (DEPRECIATION) --------------------------- ---------------- -------------- -------------- --------------- Equity $ 244,957,758 $ 40,040,248 $ 34,524,139 $ 5,516,109 Mid Cap 19,924,329 3,193,579 1,105,466 2,088,113 Small Cap 723,501,155 164,663,087 86,416,644 78,246,443 Global Equity 114,512,147 9,347,500 13,833,920 (4,486,420) International Equity 3,087,826,860 407,297,663 290,616,313 116,681,350 International Small Cap 342,884,624 49,058,118 32,527,554 16,530,564 Emerging Markets 379,773,974 37,229,788 80,911,302 (43,681,514) Bond 63,294,120 1,309,978 1,063,594 246,384 High Yield 90,007,848 228,441 14,936,899 (14,708,458) International Fixed- Income 85,691,087 3,098,765 4,037,549 (938,784) Strategic Yield 260,607,068 1,115,111 16,464,113 (15,349,002) Mortgage 177,148 47 2 45
(c) At December 31, 2000, Small Cap Portfolio held the following security which was a private placement and therefore restricted as to resale, and valued at zero: ACQUISITION ACQUISITION SECURITY DATE COST ------------------------------------ ------------- ------------ Interactive Light Holdings, Inc., 10.00%, 02/07/01 1/25/99 $1,000,000 Interactive Light Holdings, Inc. is valued as determined in good faith and in accordance with the procedures adopted by the Board of Directors. Small Cap Portfolio will bear any cost, including those involved in registration under the Securities Act of 1933, in connection with the disposition of such security. (d) Pursuant to Rule 144A of the Securities Act of 1933, these securities may only be resold in transactions exempt from registration, normally to qualified institutional buyers. At December 31, 2000, these securities amounted to $9,642,588, $3,726,518, $2,178,029, $14,175,366, $2,573,034 and $19,084,317, or 2.81%, 1.15%, 3.28%, 17.87%, 2.97% and 7.64% of the net assets of International Small Cap Portfolio, Emerging Markets Portfolio, Bond Portfolio, High Yield Portfolio, International Fixed-Income Portfolio and Strategic Yield Portfolio, respectively. (e) Variable rate security. Interest rate shown is the rate in effect at December 31, 2000. (f) Segregated security for when-issued purchases and/or forward foreign currency contracts. (g) Step-up bonds are securities which increase the interest payment rate at a specified point in time. Rate shown reflects rate in effect at December 31, 2000, which may step up at a future date. (h) Principal amount denominated in respective country's currency unless otherwise noted. (i) Structured Note. (j) Interest-only security. The principal amount shown represents the face value of the underlying security. (k) Issue in default. (l) Bankrupt security valued at zero. THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS. 67 ================================================================================ THE LAZARD FUNDS, INC. NOTES TO PORTFOLIOS OF INVESTMENTS (CONTINUED) DECEMBER 31, 2000 -------------------------------------------------------------------------------- Abbreviations: ADR--American Depositary Receipt GDR--Global Depositary Receipt LTN--Letras do Tesouro Nacional (Brazilian sovereign debt) MSB--Monetary Stabilization Bond TBA--To Be Announced CURRENCY TERMS ------------------------------ ARS--Argentine Peso INR--Indian Rupee AUD--Australian Dollar JPY--Japanese Yen BRL--Brazilian Real KES--Kenyan Shilling CAD--Canadian Dollar KRW--South Korean Won CHF--Swiss Franc MXN--Mexican Peso CLP--Chilean Peso NLG--Netherlands Guilder CNY--Chinese Yuan Renminbi PEN--Peruvian Nouveau Sol COP--Colombian Peso PHP--Philippine Peso CRC--Costa Rican Colon PLN--Polish Zloty CZK--Czech Koruna SAR--South African Rand DEM--German Deutsche Mark SEK--Swedish Krona DKK--Danish Krone SKK--Slovakian Koruna EUR--Euro SVC--El Salvador Colon FRF--French Franc TWD--Taiwan Dollar GBP--British Pound Sterling USD--United States Dollar HUF--Hungarian Forint UYU--Uruguayan Peso ILS--Israeli Shekel VEB--Venezuelan Bolivar THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS. 68 ================================================================================ THE LAZARD FUNDS, INC. NOTES TO PORTFOLIOS OF INVESTMENTS (CONTINUED) DECEMBER 31, 2000 -------------------------------------------------------------------------------- PORTFOLIO HOLDINGS BY INDUSTRY, FOR THOSE PORTFOLIOS PREVIOUSLY PRESENTED BY COUNTRY:
LAZARD LAZARD LAZARD LAZARD GLOBAL INTERNATIONAL INTERNATIONAL EMERGING EQUITY EQUITY SMALL CAP MARKETS PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO ----------- --------------- --------------- ---------------- INDUSTRY Advertising ................................... --% --% 2.0% --% Aerospace & Defense ........................... 2.0 1.2 -- -- Apparel & Textiles ............................ -- -- 2.4 -- Automotive .................................... 2.3 2.6 1.3 -- Banking & Financial Services .................. 19.7 24.6 8.4 16.7 Brewery ....................................... 1.9 1.5 -- 4.7 Broadcasting .................................. -- -- 0.7 1.6 Business Services & Supplies .................. 1.4 -- 10.1 -- Chemicals & Plastics .......................... 1.3 2.7 0.2 -- Commercial Services ........................... 0.3 0.5 -- 0.5 Computer Software ............................. 1.0 -- 1.9 3.3 Computers & Business Equipment ................ 2.6 -- 1.3 0.9 Conglomerates ................................. -- -- -- 0.7 Construction Materials ........................ 0.7 1.0 -- 1.1 Construction & Mining Equipment ............... -- -- 1.2 -- Cosmetics & Toiletries ........................ 1.2 1.5 -- -- Distribution .................................. -- -- 0.4 -- Diversified ................................... 3.7 1.2 -- -- Drugs & Health Care ........................... 13.3 8.1 5.9 1.0 Electrical Equipment .......................... -- -- -- 2.3 Electronics ................................... 5.9 7.4 4.3 1.9 Food & Beverages .............................. 5.8 3.4 5.8 1.3 Forest Products ............................... 0.9 1.0 -- -- Holding Company-Diversified ................... -- -- 2.1 -- Hotels & Restaurants .......................... 1.4 -- 1.5 -- Household Products & Home Furnishings ......... -- 1.2 6.8 0.7 Industrial & Machinery ........................ -- -- 4.2 -- Insurance ..................................... 5.5 7.8 5.4 4.6 Leisure & Entertainment ....................... -- -- 1.9 -- Manufacturing ................................. 0.6 3.4 0.6 -- Medical Products .............................. -- -- 2.7 -- Medical Supplies .............................. -- -- 1.1 -- Metals & Mining ............................... 1.0 1.3 -- 3.3 Multimedia .................................... 2.1 1.1 -- -- Oil & Gas ..................................... 6.4 6.3 -- 4.8 Paper Products ................................ -- -- -- 0.6 Petrochemicals ................................ -- -- -- 1.9 Printing ...................................... -- -- 1.0 -- Publishing .................................... -- 2.4 4.7 -- Repurchase Agreements ......................... 2.5 4.3 7.3 8.7 Retail ........................................ 2.4 3.4 11.4 3.9 Semiconductor & Components .................... 1.2 -- -- -- Semiconductor Manufacturers ................... -- -- -- 1.9 Services ...................................... -- -- 3.9 -- Steel ......................................... -- -- 0.8 4.1 Telecommunications ............................ 9.2 9.2 -- 25.0 Telephone ..................................... -- -- -- 2.9 Tobacco ....................................... -- -- 3.3 2.6 Utilities ..................................... 4.3 4.7 -- 3.0 ----- ----- ----- ----- Total Investments ............................. 100.6% 101.8% 104.6% 104.0% ===== ===== ===== =====
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS. 69 ================================================================================ THE LAZARD FUNDS, INC. NOTES TO PORTFOLIOS OF INVESTMENTS (CONCLUDED) DECEMBER 31, 2000 -------------------------------------------------------------------------------- PORTFOLIO HOLDINGS BY ASSET TYPE, FOR THOSE PORTFOLIOS PREVIOUSLY PRESENTED BY COUNTRY: LAZARD LAZARD INTERNATIONAL STRATEGIC FIXED-INCOME YIELD PORTFOLIO PORTFOLIO --------------- ----------- ASSET TYPE Asset-Backed Securities ........................ 1.5% 31.5% Collateralized Mortgage Obligations ............ -- 0.5 Corporate Bonds ................................ 54.2 21.0 Discount Notes ................................. 8.0 33.4 Foreign Government Obligations ................. 26.4 5.4 Preferred Stocks ............................... -- 1.0 Structured Notes ............................... 1.1 5.1 U.S. Government and Agency Obligations ......... 6.5 0.3 ----- ------- Total Investments .............................. 97.7% 98.2% ===== ======= THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS. 70 [THIS PAGE INTENTIONALLY LEFT BLANK.] 71 ================================================================================ THE LAZARD FUNDS, INC. STATEMENTS OF ASSETS AND LIABILITIES DECEMBER 31, 2000 --------------------------------------------------------------------------------
LAZARD LAZARD LAZARD LAZARD GLOBAL EQUITY MID CAP SMALL CAP EQUITY PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO ----------------- --------------- --------------- -------------- ASSETS Investments in securities, at value (cost $244,791,310, $19,570,328, $721,553,785, $114,170,788, $3,064,463,449, $342,648,346, $376,903,225, $63,157,323, $89,206,451, $85,301,125, $259,833,720, and $177,148, respectively) ......... $ 250,473,867 $ 22,012,442 $801,747,598 $ 110,025,727 Cash ............................................................ 528 689 772 865 Foreign currency (cost $0, $0, $0, $96,497, $3,186,278, $2,397,080, $83,475, $0, $0, $745,420, $430,644, and $0, respectively)............................................... -- -- -- 97,868 Receivables for: Investments sold ............................................... 1,381,437 192,797 7,128,206 -- Dividends and interest ......................................... 347,348 26,906 471,120 108,760 Capital stock sold ............................................. 171,323 40,753 743,784 621 Gross appreciation on foreign currency contracts ............... -- -- -- -- Collateral for securities on loan, at value ..................... -- -- -- 9,323,453 Due from Investment Manager ..................................... -- -- -- -- Deferred organizational and offering expenses ................... -- 8,884 -- -- ------------- ------------- ------------ ------------- Total assets .................................................... 252,374,503 22,282,471 810,091,480 119,557,294 ------------- ------------- ------------ ------------- LIABILITIES Due to Custodian ................................................ -- -- -- -- Payables for: Investments purchased .......................................... 1,926,865 487,835 3,024,196 412,442 Capital stock repurchased ...................................... 554,143 14,496 8,610,158 171,905 Dividends payable .............................................. -- -- -- -- Gross depreciation on foreign currency contracts ............... -- -- -- -- Payable upon return of securities on loan ....................... -- -- -- 9,323,453 Investment management fees payable .............................. 162,367 75,119 483,591 247,167 Accrued directors' fees payable ................................. 990 79 2,631 346 Accrued distribution fees payable ............................... 12,330 1,480 13,506 1,111 Other accrued expenses and payables ............................. 34,223 17,566 61,712 26,223 ------------- ------------- ------------ ------------- Total liabilities ............................................... 2,690,918 596,575 12,195,794 10,182,647 ------------- ------------- ------------ ------------- Net assets ...................................................... 249,683,585 21,685,896 797,895,686 109,374,647 ============= ============= ============ ============= NET ASSETS Paid in capital ................................................. 229,893,445 17,720,085 721,032,051 114,918,646 Undistributed (distributions in excess of) investment income--net ......................................... -- -- 237,513 (27,330) Unrealized appreciation (depreciation) on: Investments--net ............................................... 5,682,557 2,442,114 80,193,813 (4,145,061) Foreign currency--net -- -- -- (1,022) Accumulated realized gain (loss)--net ........................... 14,107,583 1,523,697 (3,567,691) (1,370,586) ------------- ------------- ------------ ------------- Net assets ...................................................... $ 249,683,585 $ 21,685,896 $797,895,686 $ 109,374,647 ============= ============= ============ ============= INSTITUTIONAL SHARES Net assets ...................................................... $ 187,517,062 $ 15,344,110 $730,179,029 $ 104,787,092 Shares of capital stock outstanding* ............................ 11,217,212 1,350,976 40,414,908 8,445,174 NET ASSET VALUE, OFFERING AND REDEMPTION PRICE PER SHARE ........ $ 16.72 $ 11.36 $ 18.07 $ 12.41 OPEN SHARES Net assets ...................................................... $ 62,166,523 $ 6,341,786 $ 67,716,657 $ 4,587,555 Shares of capital stock outstanding* ............................ 3,722,698 561,206 3,753,674 369,340 NET ASSET VALUE, OFFERING AND REDEMPTION PRICE PER SHARE ........ $ 16.70 $ 11.30 $ 18.04 $ 12.42
*$0.001 par value, 1,550,000,000 shares authorized for the Portfolios in total. THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS. 72 -------------------------------------------------------------------------------- --------------------------------------------------------------------------------
LAZARD LAZARD LAZARD LAZARD LAZARD INTERNATIONAL INTERNATIONAL EMERGING LAZARD LAZARD INTERNATIONAL STRATEGIC LAZARD EQUITY SMALL CAP MARKETS BOND HIGH YIELD FIXED-INCOME YIELD MORTGAGE PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO ---------------- ----------------- -------------- --------------- ---------------- --------------- --------------- -------------- $3,204,508,210 $ 359,415,188 $ 336,092,460 $ 63,540,504 $ 75,299,390 $ 84,752,303 $ 245,258,066 $ 177,193 323 152 398 -- -- 60,342 155 21,341 3,201,092 2,397,080 83,593 -- -- 754,318 435,964 -- -- 1,228,496 -- 2,889,157 -- 186,748 508,685 -- 6,308,801 555,275 812,019 860,920 2,491,758 1,470,627 2,452,426 782 31,291,605 245,440 688,652 3,899,318 2,016,479 348,967 4,381,489 -- -- -- -- -- -- 2,411,745 6,479,497 -- -- 21,292,871 84,562,807 -- -- -- -- -- -- -- -- -- -- -- -- 2,712 -- -- -- -- 9,665 -- -- 1,364 -------------- ------------- ------------- ------------- -------------- ------------- ------------- ---------- 3,245,310,031 385,134,502 422,239,929 71,189,899 79,817,292 89,985,050 259,516,282 203,392 -------------- ------------- ------------- ------------- -------------- ------------- ------------- ---------- -- -- -- 298,743 289,296 -- -- -- 46,312,897 16,463,567 8,312,317 4,468,026 -- 955,304 1,600,250 99,230 47,528,161 3,657,186 5,815,856 -- -- 22,582 551 -- -- -- -- 33,998 20,843 -- 1,038,649 36 -- -- -- -- -- 2,043,232 6,876,218 -- -- 21,292,871 84,562,807 -- -- -- -- -- 1,917,767 204,637 314,013 59,030 178,004 210,549 158,272 -- 10,599 1,142 1,170 219 329 284 928 -- 31,412 406 1,379 2,228 2,893 4,583 2,327 -- 349,695 57,597 82,642 23,243 22,084 29,474 44,281 4,081 -------------- ------------- ------------- ------------- -------------- ------------- ------------- ---------- 96,150,531 41,677,406 99,090,184 4,885,487 513,449 3,266,008 9,721,476 103,347 -------------- ------------- ------------- ------------- -------------- ------------- ------------- ---------- 3,149,159,500 343,457,096 323,149,745 66,304,412 79,303,843 86,719,042 249,794,806 100,045 ============== ============= ============= ============= ============== ============= ============= ========== 3,008,756,675 335,007,163 411,337,673 73,362,862 116,177,959 88,933,054 318,327,203 99,989 (14,949,699) (14,360) 437,094 (160,984) -- (368,689) (3,812,332) 11 140,044,761 16,766,842 (40,810,765 383,181 (13,907,061) (548,822) (14,575,654) 45 (400,331) (73,623) (10,701 -- -- 380,458 (381,893) -- 15,708,094 (8,228,926) (47,803,556 (7,280,647) (22,967,055) (1,676,959) (49,762,518) -- -------------- ------------- ------------- ------------- -------------- ------------- ------------- ---------- $3,149,159,500 $ 343,457,096 $ 323,149,745 $ 66,304,412 $ 79,303,843 $ 86,719,042 $ 249,794,806 $ 100,045 ============== ============= ============= ============= ============== ============= ============= ========== $3,001,933,106 $ 341,807,775 $ 317,690,844 $ 54,847,226 $ 65,751,975 $ 63,409,268 $ 240,161,770 $ 100,045 223,097,242 27,193,777 42,246,142 5,852,741 10,008,954 6,606,781 30,161,493 10,000 $ 13.46 $ 12.57 $ 7.52 $ 9.37 $ 6.57 $ 9.60 $ 7.96 $ 10.00 $ 147,226,394 $ 1,649,321 $ 5,458,901 $ 11,457,186 $ 13,551,868 $ 23,309,774 $ 9,633,036 $ -- 10,976,004 131,623 724,435 1,222,954 2,061,919 2,444,698 1,209,528 -- $ 13.41 $ 12.53 $ 7.54 $ 9.37 $ 6.57 $ 9.53 $ 7.96 $ --
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS. 73 ================================================================================ THE LAZARD FUNDS, INC. STATEMENTS OF OPERATIONS FOR THE PERIOD ENDED DECEMBER 31, 2000 --------------------------------------------------------------------------------
LAZARD LAZARD LAZARD LAZARD GLOBAL EQUITY MID CAP SMALL CAP EQUITY PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO ---------------- -------------- --------------- ----------------- INVESTMENT INCOME INCOME: Interest ........................................................ $ 255,856 $ 33,247 $ 2,142,734 $ 225,051 Dividends ....................................................... 5,631,624 320,063 9,650,214 1,390,476 ------------- ------------ ------------ --------------- Total investment income* ......................................... 5,887,480 353,310 11,792,948 1,615,527 ------------- ------------ ------------ --------------- EXPENSES: Management fees ................................................. 2,581,415 211,418 6,566,031 697,033 Administration fees ............................................. 113,848 50,641 220,106 63,592 Distribution fees (Open Shares) ................................. 226,792 19,659 163,695 15,067 Custodian fees .................................................. 112,802 59,143 191,197 129,785 Professional services ........................................... 40,777 32,869 53,745 34,197 Registration fees ............................................... 29,876 20,814 37,126 20,792 Shareholders' services .......................................... 68,319 50,771 103,616 48,193 Directors' fees and expenses .................................... 16,146 845 41,646 3,914 Shareholders' reports ........................................... 10,491 2,866 20,756 2,221 Amortization of organizational and offering expenses ............ -- 4,842 -- 183 Other ........................................................... 13,167 1,995 30,374 3,815 ------------- ------------ ------------ --------------- Total expenses before fees waived and expenses reimbursed ........ 3,213,633 455,863 7,428,292 1,018,792 Management fees waived and expenses reimbursed .................. -- (136,299) -- (24,866) Expense reductions .............................................. -- -- (8,902) -- ------------- ------------ ------------ --------------- Expenses--net .................................................... 3,213,633 319,564 7,419,390 993,926 ------------- ------------ ------------ --------------- INVESTMENT INCOME (LOSS)--NET .................................... 2,673,847 33,746 4,373,558 621,601 ------------- ------------ ------------ --------------- REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS AND FOREIGN CURRENCY--NET Realized gain (loss) on: Investments--net** ............................................. 57,395,103 1,926,999 (2,188,363) 3,838,384 Foreign currency--net .......................................... -- -- -- (66,175) Change in net unrealized appreciation (depreciation) on: Investments--net ............................................... (72,695,600) 3,016,366 123,418,898 (13,499,001) Foreign currency--net .......................................... -- -- -- 283 ------------- ------------ ------------ --------------- REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS AND FOREIGN CURRENCY--NET ........................... (15,300,497) 4,943,365 121,230,535 (9,726,509) ------------- ------------ ------------ --------------- NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS ................................................. $ (12,626,650) $ 4,977,111 $125,604,093 $ (9,104,908) ============= ============ ============ =============== *Net of foreign withholding taxes of ............................. $ 6,643 $ -- $ -- $ 132,203 ============= ============ ============ =============== **Net of foreign capital gains taxes of .......................... $ -- $ -- $ -- $ -- ============= ============ ============ ===============
*** Portfolio commenced operations on December 29, 2000. THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS. 74 -------------------------------------------------------------------------------- --------------------------------------------------------------------------------
LAZARD LAZARD LAZARD LAZARD LAZARD INTERNATIONAL INTERNATIONAL EMERGING LAZARD LAZARD INTERNATIONAL STRATEGIC LAZARD EQUITY SMALL CAP MARKETS BOND HIGH YIELD FIXED-INCOME YIELD MORTGAGE PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO*** -------------- -------------- -------------- -------------- ------------- ------------- -------------- ----------- $ 6,709,734 $ 1,145,736 $ 1,578,981 $ 5,820,322 $ 11,373,066 $ 3,707,061 $ 22,494,624 $ 41 55,164,907 5,047,546 5,597,190 -- 815,633 672 738,732 -- -------------- -------------- -------------- -------------- ------------- ------------- -------------- ----------- 61,874,641 6,193,282 7,176,171 5,820,322 12,188,699 3,707,733 23,233,356 41 -------------- -------------- -------------- -------------- ------------- ------------- -------------- ----------- 25,120,125 2,208,823 3,820,972 403,761 702,233 569,894 2,248,959 3 479,973 103,922 121,434 61,154 63,731 60,201 104,980 -- 375,655 5,466 22,326 26,379 37,671 28,022 35,411 -- 3,216,474 432,684 766,486 99,352 81,907 167,752 288,686 -- 110,175 38,628 40,950 34,114 34,260 33,971 39,018 3,500 56,153 27,923 27,195 24,713 22,972 24,717 28,639 -- 137,632 55,840 60,546 51,748 45,926 52,744 58,297 1,050 160,290 13,490 17,868 3,350 3,995 3,119 13,959 -- 39,677 5,966 7,498 3,864 967 553 7,524 25 -- -- -- -- 4,842 -- -- 11 109,275 9,914 16,063 3,686 3,931 4,401 12,697 100 -------------- -------------- -------------- -------------- ------------- ------------- -------------- ----------- 29,805,429 2,902,656 4,901,338 712,121 1,002,435 945,374 2,838,170 4,689 -- (18,438) (17,500) (17,519) (249,229) (87,985) -- (4,684) -- (2,050) (32,913) -- (5,776) -- (1,547) -- -------------- -------------- -------------- -------------- ------------- ------------- -------------- ----------- 29,805,429 2,882,168 4,850,925 694,602 747,430 857,389 2,836,623 5 -------------- -------------- -------------- -------------- ------------- ------------- -------------- ----------- 32,069,212 3,311,114 2,325,246 5,125,720 11,441,269 2,850,344 20,396,733 36 -------------- -------------- -------------- -------------- ------------- ------------- -------------- ----------- 361,195,634 10,056,048 6,887,889 (2,622,044) (15,237,238) (3,262,012) (29,292,054) -- (9,369,306) (770,174) (587,919) -- -- (1,830,525) 18,200,453 -- (756,737,934) (24,534,929) (134,772,317) 2,696,711 (11,917,431) (1,817,176) (142,351) 45 (240,974) (65,871) (16,272) -- -- 615,939 (4,988,482) -- -------------- -------------- -------------- -------------- ------------- ------------- -------------- ----------- (405,152,580) (15,314,926) (128,488,619) 74,667 (27,154,669) (6,293,774) (16,222,434) 45 -------------- -------------- -------------- -------------- ------------- ------------- -------------- ----------- $ (373,083,368) $ (12,003,812) $ (126,163,373) $ 5,200,387 $ (15,713,400) $ (3,443,430) $ 4,174,299 $ 81 ============== ============== ============== ============== ============= ============= ============== =========== $ 8,734,880 $ 722,171 $ 598,757 $ -- $ -- $ 7,221 $ 370 $ -- ============== ============== ============== ============== ============= ============= ============== =========== $ -- $ -- $ 258,170 $ -- $ -- $ 5,256 $ 54,278 $ -- ============== ============== ============== ============== ============= ============= ============== ===========
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS. 75 ================================================================================ THE LAZARD FUNDS, INC. STATEMENTS OF CHANGES IN NET ASSETS --------------------------------------------------------------------------------
LAZARD EQUITY PORTFOLIO -------------------------------------- YEAR ENDED YEAR ENDED DECEMBER 31, 2000 DECEMBER 31, 1999 ------------------- ------------------ INCREASE (DECREASE) IN NET ASSETS: OPERATIONS: Investment income (loss)--net .................................................. $ 2,673,847 $ 5,713,817 Realized gain (loss) on investments and foreign currency--net .................. 57,395,103 22,683,544 Change in unrealized appreciation (depreciation)--net .......................... (72,695,600) (7,619,666) -------------- -------------- Net increase (decrease) in net assets resulting from operations ................. (12,626,650) 20,777,695 -------------- -------------- DISTRIBUTIONS TO SHAREHOLDERS: From investment income--net Institutional Shares .......................................................... (2,231,410) (4,442,659) Open Shares ................................................................... (534,416) (1,298,892) From realized gains--net Institutional Shares .......................................................... (34,523,152) (22,408,104) Open Shares ................................................................... (11,843,078) (7,906,169) In excess of investment income--net Institutional Shares .......................................................... (16,449) -- Open Shares ................................................................... (3,939) -- In excess of realized gains--net Institutional Shares .......................................................... -- -- Open Shares ................................................................... -- -- -------------- -------------- Net decrease in net assets resulting from distributions ......................... (49,152,444) (36,055,824) -------------- -------------- CAPITAL STOCK TRANSACTIONS: Net proceeds from sales Institutional Shares .......................................................... 61,385,178 161,627,546 Open Shares ................................................................... 27,266,542 84,343,406 Net proceeds in connection with acquisition of Bantam Value Portfolio Institutional Shares .......................................................... -- -- Open Shares ................................................................... -- -- Net proceeds from reinvestment of distributions Institutional Shares .......................................................... 35,428,274 26,163,636 Open Shares ................................................................... 12,240,399 9,119,227 Cost of shares redeemed Institutional Shares .......................................................... (240,500,025) (158,758,835) Open Shares ................................................................... (84,011,522) (86,312,838) -------------- -------------- Net increase (decrease) in net assets from capital stock transactions ........... (188,191,154) 36,182,142 -------------- -------------- Total increase (decrease) in net assets ......................................... (249,970,248) 20,904,013 Net assets at beginning of year ................................................. 499,653,833 478,749,820 -------------- -------------- Net assets at end of year* ...................................................... $ 249,683,585 $ 499,653,833 ============== ============== SHARES ISSUED AND REPURCHASED: INSTITUTIONAL SHARES: Shares outstanding at beginning of year ........................................ 17,915,506 16,605,093 -------------- -------------- Shares sold .................................................................... 3,066,282 7,217,805 Shares issued in connection with acquisition of Bantam Value Portfolio ......... -- -- Shares issued to shareholders from reinvestment of distributions ............... 2,103,844 1,227,452 Shares repurchased ............................................................. (11,868,420) (7,134,844) -------------- -------------- Net increase (decrease) ........................................................ (6,698,294) 1,310,413 -------------- -------------- Shares outstanding at end of year .............................................. 11,217,212 17,915,506 ============== ============== OPEN SHARES: Shares outstanding at beginning of year ........................................ 5,796,320 5,406,563 -------------- -------------- Shares sold .................................................................... 1,349,595 3,792,337 Shares issued in connection with acquisition of Bantam Value Portfolio ......... -- -- Shares issued to shareholders from reinvestment of distributions ............... 723,431 426,832 Shares repurchased ............................................................. (4,146,648) (3,829,412) -------------- -------------- Net increase (decrease) ........................................................ (2,073,622) 389,757 -------------- -------------- Shares outstanding at end of year .............................................. 3,722,698 5,796,320 ============== ============== *Includes undistributed (distributions in excess of) investment income--net ..... $ -- $ 91,979 ============== ==============
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS. 76 ================================================================================ --------------------------------------------------------------------------------
LAZARD MID CAP PORTFOLIO LAZARD SMALL CAP PORTFOLIO LAZARD GLOBAL EQUITY PORTFOLIO --------------------------------------- --------------------------------------- -------------------------------------- YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED DECEMBER 31, 2000 DECEMBER 31, 1999 DECEMBER 31, 2000 DECEMBER 31, 1999 DECEMBER 31, 2000 DECEMBER 31, 1999 ------------------- ------------------- ------------------- ------------------- ------------------- ------------------ $ 33,746 $ 92,535 $ 4,373,558 $ 6,943,540 $ 621,601 $ 756,323 1,926,999 3,443,959 (2,188,363) 104,474,693 3,772,209 2,892,793 3,016,366 (2,411,437) 123,418,898 (133,084,218) (13,498,718) 6,397,713 ---------------- --------------- -------------- ---------------- --------------- ---------------- 4,977,111 1,125,057 125,604,093 (21,665,985) (9,104,908) 10,046,829 ---------------- --------------- -------------- ---------------- --------------- ---------------- (33,230) (85,319) (10,388,013) (6,644,255) (575,574) (720,338) (516) (20,147) (532,442) (425,376) (11,974) (62,237) (2,769,172) (374,199) (38,162,495) (51,857,819) (3,980,195) (2,116,975) (836,056) (134,758) (2,720,892) (4,948,488) (187,255) (204,954) (12,330) (1,176) -- -- -- (146,012) (192) (278) -- -- -- (12,615) -- -- (110) -- (1,364,417) -- -- -- (8) -- (64,191) -- ---------------- --------------- ---------------- ---------------- --------------- ---------------- (3,651,496) (615,877) (51,803,960) (63,875,938) (6,183,606) (3,263,131) ---------------- --------------- --------------- ---------------- --------------- ---------------- 4,440,827 2,700,743 461,592,135 547,345,994 58,276,470 378,158,687 3,970,363 8,445,908 89,818,313 74,792,124 1,044,736 2,661,134 -- -- -- 26,354,774 -- -- -- -- -- 3,571,473 -- -- 2,330,690 410,589 42,677,429 53,233,833 5,856,440 2,671,819 705,002 144,681 3,220,070 5,313,688 211,837 234,521 (19,643,155) (31,356,602) (748,772,609) (1,050,552,721) (8,488,632) (341,154,104) (12,988,297) (11,385,727) (117,797,644) (86,209,652) (2,056,550) (2,071,191) ---------------- --------------- --------------- ---------------- --------------- ---------------- (21,184,570) (31,040,408) (269,262,306) (426,150,487) 54,844,301 40,500,866 ---------------- --------------- --------------- ---------------- --------------- ---------------- (19,858,955) (30,531,228) (195,462,173) (511,692,410) 39,555,787 47,284,564 41,544,851 72,076,079 993,357,859 1,505,050,269 69,818,860 22,534,296 ---------------- --------------- --------------- ---------------- --------------- ---------------- $ 21,685,896 $ 41,544,851 $ 797,895,686 $ 993,357,859 $ 109,374,647 $ 69,818,860 ================ =============== =============== ================ =============== ================ 2,553,780 5,327,538 54,749,412 81,187,480 4,366,106 1,347,859 ---------------- --------------- --------------- ---------------- --------------- ---------------- 392,767 253,804 27,339,672 31,129,994 4,239,184 26,763,658 -- -- -- 1,385,450 -- -- 229,218 39,427 2,550,600 3,315,054 478,921 189,315 (1,824,789) (3,066,989) (44,224,776) (62,268,566) (639,037) (23,934,726) ---------------- --------------- --------------- ---------------- --------------- ---------------- (1,202,804) (2,773,758) (14,334,504) (26,438,068) 4,079,068 3,018,247 ---------------- --------------- --------------- ---------------- --------------- ---------------- 1,350,976 2,553,780 40,414,908 54,749,412 8,445,174 4,366,106 ================ =============== =============== ================ =============== ================ 1,306,121 1,564,634 5,233,657 5,391,454 430,069 366,528 ---------------- --------------- --------------- ---------------- --------------- ---------------- 372,166 810,630 5,305,280 4,303,821 75,852 188,541 -- -- -- 188,462 -- -- 69,868 14,014 193,580 333,269 17,215 16,602 (1,186,949) (1,083,157) (6,978,843) (4,983,349) (153,796) (141,602) ---------------- --------------- --------------- ---------------- --------------- ---------------- (744,915) (258,513) (1,479,983) (157,797) (60,729) 63,541 ---------------- --------------- --------------- ---------------- --------------- ---------------- 561,206 1,306,121 3,753,674 5,233,657 369,340 430,069 ================ =============== =============== ================ =============== ================ $ -- $ -- $ 237,513 $ 6,823,150 $ (27,330) $ (11,483) ================ =============== =============== ================ =============== ================
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS. 77 ================================================================================ THE LAZARD FUNDS, INC. STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED) --------------------------------------------------------------------------------
LAZARD INTERNATIONAL EQUITY PORTFOLIO -------------------------------------- YEAR ENDED YEAR ENDED DECEMBER 31, 2000 DECEMBER 31, 1999 ------------------- ------------------ INCREASE (DECREASE) IN NET ASSETS: OPERATIONS: Investment income (loss)--net .................................................. $ 32,069,212 $ 67,316,342 Realized gain (loss) on investments and foreign currency--net .................. 351,826,328 267,284,910 Change in unrealized appreciation (depreciation)--net .......................... (756,978,908) 405,129,866 ---------------- ---------------- Net increase (decrease) in net assets resulting from operations ................. (373,083,368) 739,731,118 ---------------- ---------------- DISTRIBUTIONS TO SHAREHOLDERS: From investment income--net Institutional Shares .......................................................... (34,532,302) (70,479,560) Open Shares .................................................................. (1,430,879) (2,472,196) From realized gains--net Institutional Shares .......................................................... (352,683,226) (191,266,859) Open Shares .................................................................. (17,721,930) (7,348,292) In excess of investment income--net Institutional Shares .......................................................... -- (32,606,665) Open Shares .................................................................. -- (1,143,737) In excess of realized gains--net Institutional Shares .......................................................... -- -- Open Shares .................................................................. -- -- ---------------- ---------------- Net decrease in net assets resulting from distributions ......................... (406,368,337) (305,317,309) ---------------- ---------------- CAPITAL STOCK TRANSACTIONS: Net proceeds from sales Institutional Shares ......................................................... 2,499,587,908 1,567,830,033 Open Shares .................................................................. 425,016,149 290,150,531 Net proceeds from reinvestment of distributions Institutional Shares ......................................................... 365,319,055 274,265,893 Open Shares .................................................................. 16,449,785 9,632,374 Cost of shares redeemed Institutional Shares ......................................................... (2,701,895,463) (1,557,031,320) Open Shares .................................................................. (398,090,043) (223,629,942) ---------------- ---------------- Net increase (decrease) in net assets from capital stock transactions ........... 206,387,391 361,217,569 ---------------- ---------------- Total increase (decrease) in net assets ......................................... (573,064,314) 795,631,378 Net assets at beginning of year ................................................. 3,722,223,814 2,926,592,436 ---------------- ---------------- Net assets at end of year* ...................................................... $ 3,149,159,500 $ 3,722,223,814 ================ ================ SHARES ISSUED AND REPURCHASED: INSTITUTIONAL SHARES: Shares outstanding at beginning of year ........................................ 207,337,268 189,079,168 ---------------- ---------------- Shares sold .................................................................... 161,834,339 97,266,494 Shares issued to shareholders from reinvestment of distributions ............... 26,927,629 16,569,235 Shares repurchased ............................................................. (173,001,994) (95,577,629) ---------------- ---------------- Net increase (decrease) ........................................................ 15,759,974 18,258,100 ---------------- ---------------- Shares outstanding at end of year .............................................. 223,097,242 207,337,268 ================ ================ OPEN SHARES: Shares outstanding at beginning of year ........................................ 7,994,053 3,106,682 ---------------- ---------------- Shares sold .................................................................... 27,888,419 18,015,062 Shares issued to shareholders from reinvestment of distributions ............... 1,217,140 582,110 Shares repurchased ............................................................. (26,123,608) (13,709,801) ---------------- ---------------- Net increase (decrease) ........................................................ 2,981,951 4,887,371 ---------------- ---------------- Shares outstanding at end of year .............................................. 10,976,004 7,994,053 ================ ================ *Includes undistributed (distributions in excess of) investment income--net ..... $ (14,949,699) $ (48,028,440) ================ ================
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS. 78 ================================================================================ --------------------------------------------------------------------------------
LAZARD INTERNATIONAL SMALL CAP PORTFOLIO LAZARD EMERGING MARKETS PORTFOLIO LAZARD BOND PORTFOLIO --------------------------------------- --------------------------------------- -------------------------------------- YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED DECEMBER 31, 2000 DECEMBER 31, 1999 DECEMBER 31, 2000 DECEMBER 31, 1999 DECEMBER 31, 2000 DECEMBER 31, 1999 ------------------- ------------------- ------------------- ------------------- ------------------- ------------------ $ 3,311,114 $ 2,219,317 $ 2,325,246 $ 3,798,049 $ 5,125,720 $ 6,509,592 9,285,874 1,257,458 6,299,970 (929,711) (2,622,044) (4,899,519) (24,600,800) 42,610,498 (134,788,589) 170,956,951 2,696,711 (2,234,468) ----------------- ---------------- -------------- -------------- ---------------- --------------- (12,003,812) 46,087,273 (126,163,373) 173,825,289 5,200,387 (624,395) ----------------- ---------------- -------------- -------------- ---------------- --------------- (2,695,984) (1,852,846) (821,557) (4,349,612) (4,464,115) (5,357,536) (5,161) (17,000) -- (79,945) (645,952) (671,175) (11,427,142) (1,722,369) -- -- -- -- (62,848) (22,299) -- -- -- -- -- -- -- (122,189) (7,849) (478,824) -- -- -- (2,246) (1,136) (59,985) (7,416,389) -- -- -- -- -- (40,790) -- -- -- -- -- ----------------- ---------------- -------------- -------------- ---------------- --------------- (21,648,314) (3,614,514) (821,557) (4,553,992) (5,119,052) (6,567,520) ----------------- ---------------- -------------- -------------- ---------------- --------------- 315,369,343 60,812,490 391,151,848 181,437,898 67,422,399 363,141,029 9,859,578 1,056,862 1,805,250 14,452,309 19,635,208 5,171,755 20,585,318 3,347,465 750,606 3,865,326 3,918,798 5,137,228 106,983 34,262 -- 75,410 581,833 653,992 (178,275,031) (66,183,628) (415,547,373) (183,031,252) (108,057,252) (370,764,169) (10,662,003) (1,840,507) (3,794,685) (16,525,857) (20,439,987) (8,608,945) ----------------- ---------------- -------------- -------------- ---------------- --------------- 156,984,188 (2,773,056) (25,634,354) 273,834 (36,939,001) (5,269,110) ----------------- ---------------- -------------- -------------- ---------------- --------------- 123,332,062 39,699,703 (152,619,284) 169,545,131 (36,857,666) (12,461,025) 220,125,034 180,425,331 475,769,029 306,223,898 103,162,078 115,623,103 ----------------- ---------------- -------------- -------------- ---------------- --------------- $ 343,457,096 $ 220,125,034 $ 323,149,745 $ 475,769,029 $ 66,304,412 $ 103,162,078 ================= ================ ============== ============== ================ =============== 15,418,580 15,590,528 43,466,805 42,950,229 9,853,933 10,154,742 ----------------- ---------------- -------------- -------------- ---------------- --------------- 22,800,776 5,033,426 42,815,951 23,270,856 7,296,990 38,115,392 1,661,402 255,727 98,259 395,536 425,174 538,765 (12,686,981) (5,461,101) (44,134,873) (23,149,816) (11,723,356) (38,954,966) ----------------- ---------------- -------------- -------------- ---------------- --------------- 11,775,197 (171,948) (1,220,663) 516,576 (4,001,192) (300,809) ----------------- ---------------- -------------- -------------- ---------------- --------------- 27,193,777 15,418,580 42,246,142 43,466,805 5,852,741 9,853,933 ================= ================ ============== ============== ================ =============== 173,602 232,449 977,024 1,176,048 1,248,705 1,540,500 ----------------- ---------------- -------------- -------------- ---------------- --------------- 755,609 93,525 185,304 2,069,221 2,118,772 534,487 8,621 2,602 -- 7,481 63,104 68,542 (806,209) (154,974) (437,893) (2,275,726) (2,207,627) (894,824) ----------------- ---------------- -------------- -------------- ---------------- --------------- (41,979) (58,847) (252,589) (199,024) (25,751) (291,795) ----------------- ---------------- -------------- -------------- ---------------- --------------- 131,623 173,602 724,435 977,024 1,222,954 1,248,705 ================= ================ ============== ============== ================ =============== $ (14,360) $ 146,077 $ 437,094 $ (525,783) $ (160,984) $ (551,061) ================= ================ ============== ============== ================ ===============
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS. 79 ================================================================================ THE LAZARD FUNDS, INC. STATEMENTS OF CHANGES IN NET ASSETS (CONCLUDED) --------------------------------------------------------------------------------
LAZARD HIGH YIELD PORTFOLIO -------------------------------------- YEAR ENDED YEAR ENDED DECEMBER 31, 2000 DECEMBER 31, 1999 ------------------- ------------------ INCREASE (DECREASE) IN NET ASSETS: OPERATIONS: Investment income (loss)--net ........................................................... $ 11,441,269 $ 7,841,589 Realized gain (loss) on investments, cross currency swaps and foreign currency--net ..... (15,237,238) (5,468,472) Change in unrealized appreciation (depreciation)--net ................................... (11,917,431) (843,969) ------------- ------------ Net increase (decrease) in net assets resulting from operations .......................... (15,713,400) 1,529,148 ------------- ------------ DISTRIBUTIONS TO SHAREHOLDERS: From investment income--net Institutional Shares ................................................................... (9,618,423) (7,707,773) Open Shares .......................................................................... (1,823,113) (133,823) From realized gains--net Institutional Shares ................................................................... -- -- Open Shares .......................................................................... -- -- In excess of investment income--net Institutional Shares ................................................................... -- (9,851) Open Shares .......................................................................... -- (171) In excess of realized gains--net Institutional Shares ................................................................... -- -- Open Shares .......................................................................... -- -- From capital--net Institutional Shares ................................................................... -- -- Open Shares ........................................................................... -- -- ------------- ------------ Net decrease in net assets resulting from distributions .................................. (11,441,536) (7,851,618) ------------- ------------ CAPITAL STOCK TRANSACTIONS: Net proceeds from sales Institutional Shares .................................................................. 25,318,514 45,382,021 Open Shares ........................................................................... 18,463,169 999,125 Net proceeds from reinvestment of distributions Institutional Shares .................................................................. 9,384,119 7,582,376 Open Shares ........................................................................... 1,532,612 121,082 Cost of shares redeemed Institutional Shares .................................................................. (30,149,120) (5,033,496) Open Shares ........................................................................... (3,060,285) (642,431) ------------- ------------ Net increase (decrease) in net assets from capital stock transactions .................... 21,489,009 48,408,677 ------------- ------------ Total increase (decrease) in net assets .................................................. (5,665,927) 42,086,207 Net assets at beginning of period ........................................................ 84,969,770 42,883,563 ------------- ------------ Net assets at end of period* ............................................................. $ 79,303,843 $ 84,969,770 ============= ============ SHARES ISSUED AND REPURCHASED: INSTITUTIONAL SHARES: Shares outstanding at beginning of period ............................................... 9,535,605 4,453,235 ------------- ------------ Shares sold ............................................................................. 3,514,904 4,793,737 Shares issued to shareholders from reinvestment of distributions ........................ 1,219,224 833,182 Shares repurchased ...................................................................... (4,260,779) (544,549) ------------- ------------ Net increase (decrease) ................................................................. 473,349 5,082,370 ------------- ------------ Shares outstanding at end of period ..................................................... 10,008,954 9,535,605 ============= ============ OPEN SHARES: Shares outstanding at beginning of period ............................................... 148,700 100,729 ------------- ------------ Shares sold ............................................................................. 2,162,719 108,247 Shares issued to shareholders from reinvestment of distributions ........................ 205,098 12,591 Shares repurchased ...................................................................... (454,598) (72,867) ------------- ------------ Net increase (decrease) ................................................................. 1,913,219 47,971 ------------- ------------ Shares outstanding at end of period ..................................................... 2,061,919 148,700 ============= ============ *Includes undistributed (distributions in excess of) investment income--net .............. $ -- $ 267 ============= ============ ** Portfolio commenced operations on December 29, 2000.
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS. 80 ================================================================================ --------------------------------------------------------------------------------
LAZARD INTERNATIONAL FIXED-INCOME PORTFOLIO LAZARD STRATEGIC YIELD PORTFOLIO LAZARD MORTAGE PORTFOLIO** ------------------------------------------- ----------------------------------------- --------------------------- YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED PERIOD ENDED DECEMBER 31, 2000 DECEMBER 31, 1999 DECEMBER 31, 2000 DECEMBER 31, 1999 DECEMBER 31, 2000 ------------------- --------------------- ------------------- ------------------- --------------------------- $ 2,850,344 $ 3,545,955 $ 20,396,733 $ 24,000,315 $ 36 (5,092,537) (4,192,996) (11,091,601) (11,218,336) -- (1,201,237) (4,001,310) (5,130,833) 4,041,759 45 -------------- -------------- -------------- -------------- ------------ (3,443,430) (4,648,351) 4,174,299 16,823,738 81 -------------- -------------- -------------- -------------- ------------ -- -- (24,763,188) (22,570,103) (36) -- -- (1,105,033) (1,430,212) -- -- (675,540) -- -- -- -- (34,819) -- -- -- -- -- (5,394,953) (2,917) -- -- -- (240,745) (185) -- -- (146) -- -- -- -- (8) -- -- -- (812,428) (1,125,469) -- -- -- (143,218) (52,805) -- -- -- -------------- -------------- -------------- -------------- ------------ (955,646) (1,888,787) (31,503,919) (24,003,417) (36) -------------- -------------- -------------- -------------- ------------ 10,333,776 27,539,426 72,949,621 191,948,304 100,000 22,829,224 2,031,273 26,149,984 182,317,275 -- 801,686 1,719,854 27,375,427 16,624,003 -- 143,376 83,838 1,089,388 1,205,221 -- (17,371,090) (64,592,946) (140,214,583) (293,687,843) -- (3,272,741) (2,841,194) (32,376,702) (189,135,351) -- -------------- -------------- -------------- -------------- ------------ 13,464,231 (36,059,749) (45,026,865) (90,728,391) 100,000 -------------- -------------- -------------- -------------- ------------ 9,065,155 (42,596,887) (72,356,485) (97,908,070) 100,045 77,653,887 120,250,774 322,151,291 420,059,361 -- -------------- -------------- -------------- -------------- ------------ $ 86,719,042 $ 77,653,887 $ 249,794,806 $ 322,151,291 $ 100,045 ============== ============== ============== ============== ============ 7,252,221 10,782,322 34,670,734 44,107,303 -- -------------- -------------- -------------- -------------- ------------ 1,072,625 2,688,009 8,430,468 21,343,867 10,000 84,099 170,799 3,278,451 1,863,022 -- (1,802,164) (6,388,909) (16,218,160) (32,643,458) -- -------------- -------------- -------------- -------------- ------------ (645,440) (3,530,101) (4,509,241) (9,436,569) 10,000 -------------- -------------- -------------- -------------- ------------ 6,606,781 7,252,221 30,161,493 34,670,734 10,000 ============== ============== ============== ============== ============ 372,893 444,293 1,816,497 2,489,504 -- -------------- -------------- -------------- -------------- ------------ 2,395,420 198,864 3,087,124 20,407,856 -- 15,312 8,366 129,992 135,127 -- (338,927) (278,630) (3,824,085) (21,215,990) -- -------------- -------------- -------------- -------------- ------------ 2,071,805 (71,400) (606,969) (673,007) -- -------------- -------------- -------------- -------------- ------------ 2,444,698 372,893 1,209,528 1,816,497 -- ============== ============== ============== ============== ============ $ (368,689) $ (165,595) $ (3,812,332) $ 6,042,917 $ 11 ============== ============== ============== ============== ============
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS. 81 ================================================================================ THE LAZARD FUNDS, INC. FINANCIAL HIGHLIGHTS SELECTED DATA FOR A SHARE OF CAPITAL STOCK OUTSTANDING THROUGHOUT EACH PERIOD: -------------------------------------------------------------------------------- LAZARD EQUITY PORTFOLIO
YEAR ENDED --------------------------------------------------------------------------- 12/31/00 12/31/99 12/31/98 12/31/97 12/31/96 INSTITUTIONAL SHARES -------------- ------------ ------------ ------------ ------------- Net asset value, beginning of period ............. $ 21.08 $ 21.75 $ 19.98 $ 19.24 $ 17.41 -------- ------- ------- ------- ------- Income (loss) from investment operations: Net investment income (loss) (c) ................ 0.17 0.26 0.28 0.22 0.33 Net realized and unrealized gain (loss) ......... (0.79) 0.66 3.10 4.54 3.06 -------- ------- ------- ------- ------- Total from investment operations ................ (0.62) 0.92 3.38 4.76 3.39 -------- ------- ------- ------- ------- Less distributions from and in excess of: Net investment income ........................... (0.23) (0.26) (0.26) (0.22) (0.33) Net realized gain ............................... (3.51) (1.33) (1.35) (3.80) (1.23) -------- ------- ------- ------- ------- Total distributions ............................. (3.74) (1.59) (1.61) (4.02) (1.56) -------- ------- ------- ------- ------- Net asset value, end of period ................... $ 16.72 $ 21.08 $ 21.75 $ 19.98 $ 19.24 ======== ======= ======= ======= ======= TOTAL RETURN (a) ................................. (2.6)% 4.2% 17.3% 25.1% 19.9% RATIOS AND SUPPLEMENTAL DATA: Net assets, end of period (in thousands) ......... $187,517 $377,660 $361,126 $333,575 $278,605 Ratios to average net assets: Net expenses .................................... 0.86% 0.84% 0.85% 0.86% 0.89% Gross expenses .................................. 0.86% 0.84% 0.85% 0.87% 0.89% Net investment income ........................... 0.85% 1.14% 1.28% 1.00% 1.87% Portfolio turnover rate .......................... 36% 62% 76% 78% 66%
YEAR ENDED ------------------------------------------- FOR THE PERIOD 2/5/97* TO 12/31/00 12/31/99 12/31/98 12/31/97 OPEN SHARES ------------- ------------ ------------ --------------- Net asset value, beginning of period ............. $ 21.05 $ 21.76 $ 19.99 $ 20.19 ------- ------- ------- ------- Income (loss) from investment operations: Net investment income (loss) (c) ................ 0.12 0.20 0.20 0.13 Net realized and unrealized gain (loss) ......... (0.79) 0.65 3.12 3.62 -------- ------- ------- ------- Total from investment operations ................ (0.67) 0.85 3.32 3.75 -------- ------- ------- ------- Less distributions from and in excess of: Net investment income ........................... (0.17) (0.23) (0.20) (0.15) Net realized gain ............................... (3.51) (1.33) (1.35) (3.80) -------- ------- ------- ------- Total distributions ............................. (3.68) (1.56) (1.55) (3.95) -------- ------- ------- ------- Net asset value, end of period ................... $ 16.70 $ 21.05 $ 21.76 $ 19.99 ======== ======= ======= ======= TOTAL RETURN (a) ................................. (2.9)% 3.9% 17.0% 18.9% RATIOS AND SUPPLEMENTAL DATA: Net assets, end of period (in thousands) ......... $62,167 $121,994 $117,624 $22,811 Ratios to average net assets: Net expenses (b) ................................ 1.13% 1.10% 1.12% 1.22% Gross expenses (b) .............................. 1.13% 1.10% 1.12% 1.35% Net investment income (b) ....................... 0.57% 0.89% 0.96% 0.60% Portfolio turnover rate .......................... 36% 62% 76% 78%
SEE NOTES TO FINANCIAL HIGHLIGHTS. THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS. 82 ================================================================================ THE LAZARD FUNDS, INC. FINANCIAL HIGHLIGHTS (CONTINUED) SELECTED DATA FOR A SHARE OF CAPITAL STOCK OUTSTANDING THROUGHOUT EACH PERIOD: -------------------------------------------------------------------------------- LAZARD MID CAP PORTFOLIO
YEAR ENDED FOR THE PERIOD -------------------------------------- 11/4/97* TO 12/31/00 12/31/99 12/31/98 12/31/97 INSTITUTIONAL SHARES ------------ ------------ ------------ --------------- Net asset value, beginning of period ............. $ 10.78 $ 10.46 $ 10.26 $ 10.00 ------- ------- ------- ------- Income (loss) from investment operations: Net investment income (loss) (c) ................ 0.02 0.02 0.05 0.02 Net realized and unrealized gain (loss) ......... 2.20 0.43 0.31 0.26 ------- ------- ------- ------- Total from investment operations ................ 2.22 0.45 0.36 0.28 ------- ------- ------- ------- Less distributions from and in excess of: Net investment income ........................... (0.03) (0.03) (0.05) (0.02) Net realized gain ............................... (1.61) (0.10) (0.11) -- ------- ------- ------- ------- Total distributions ............................. (1.64) (0.13) (0.16) (0.02) ------- ------- ------- ------- Net asset value, end of period ................... $ 11.36 $ 10.78 $ 10.46 $ 10.26 ======= ======= ======= ======= TOTAL RETURN (a) ................................. 22.4% 4.4% 3.7% 2.8% RATIOS AND SUPPLEMENTAL DATA: Net assets, end of period (in thousands) ......... $15,344 $27,521 $55,731 $49,779 Ratios to average net assets: Net expenses (b) ................................ 1.05% 1.05% 1.05% 1.05% Gross expenses (b) .............................. 1.50% 1.17% 1.23% 1.44% Net investment income (b) ....................... 0.20% 0.23% 0.48% 1.02% Portfolio turnover rate .......................... 152% 113% 86% 1%
YEAR ENDED FOR THE PERIOD -------------------------------------- 11/4/97* TO 12/31/00 12/31/99 12/31/98 12/31/97 OPEN SHARES ------------ ------------ ------------ --------------- Net asset value, beginning of period ............. $ 10.74 $ 10.45 $ 10.26 $ 10.00 ------- ------- ------- ------- Income (loss) from investment operations: Net investment income (loss) (c) ................ (0.01) (0.01) 0.02 0.01 Net realized and unrealized gain (loss) ......... 2.18 0.42 0.32 0.26 ------- ------- ------- ------- Total from investment operations ................ 2.17 0.41 0.34 0.27 ------- ------- ------- ------- Less distributions from and in excess of: Net investment income ........................... -- (0.02) (0.04) (0.01) Net realized gain ............................... (1.61) (0.10) (0.11) -- ------- ------- ------- ------- Total distributions ............................. (1.61) (0.12) (0.15) (0.01) ------- ------- ------- ------- Net asset value, end of period ................... $ 11.30 $ 10.74 $ 10.45 $ 10.26 ======= ======= ======= ======= TOTAL RETURN (a) ................................. 22.0% 4.0% 3.4% 2.7% RATIOS AND SUPPLEMENTAL DATA: Net assets, end of period (in thousands) ......... $ 6,342 $14,024 $16,345 $ 1,806 Ratios to average net assets: Net expenses (b) ................................ 1.35% 1.35% 1.35% 1.35% Gross expenses (b) .............................. 1.91% 1.55% 1.66% 4.97% Net investment income (loss) (b) ................ (0.09)% (0.08)% 0.29% 0.72% Portfolio turnover rate .......................... 152% 113% 86% 1%
SEE NOTES TO FINANCIAL HIGHLIGHTS. THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS. 83 ================================================================================ THE LAZARD FUNDS, INC. FINANCIAL HIGHLIGHTS (CONTINUED) SELECTED DATA FOR A SHARE OF CAPITAL STOCK OUTSTANDING THROUGHOUT EACH PERIOD: -------------------------------------------------------------------------------- LAZARD SMALL CAP PORTFOLIO
YEAR ENDED --------------------------------------------------------------------------- 12/31/00 12/31/99 12/31/98 12/31/97 12/31/96 INSTITUTIONAL SHARES ------------ ---------------- --------------- --------------- ------------- Net asset value, beginning of period ............. $ 16.57 $ 17.39 $ 20.02 $ 18.44 $ 15.95 ------- -------- --------- --------- ------- Income (loss) from investment operations: Net investment income (loss) (c) ................ 0.09 0.10 0.08 0.07 0.11 Net realized and unrealized gain (loss) ......... 2.45 0.17 (d) (2.60) 4.92 3.68 ------- -------- --------- --------- ------- Total from investment operations ................ 2.54 0.27 (2.52) 4.99 3.79 ------- -------- --------- --------- ------- Less distributions from and in excess of: Net investment income ........................... (0.23) (0.11) (0.01) (0.06) (0.11) Net realized gain ............................... (0.81) (0.98) (0.10) (3.35) (1.19) ------- -------- --------- --------- ------- Total distributions ............................. (1.04) (1.09) (0.11) (3.41) (1.30) ------- -------- --------- --------- ------- Net asset value, end of period ................... $ 18.07 $ 16.57 $ 17.39 $ 20.02 $ 18.44 ======= ======== ========= ========= ======= TOTAL RETURN (a) ................................. 15.9% 1.8% (12.6)% 28.1% 23.9% RATIOS AND SUPPLEMENTAL DATA: Net assets, end of period (in thousands) ......... $730,179 $906,945 $1,411,503 $1,445,075 $981,405 Ratios to average net assets: Net expenses .................................... 0.83% 0.81% 0.81% 0.82% 0.84% Gross expenses .................................. 0.83% 0.81% 0.81% 0.82% 0.84% Net investment income ........................... 0.52% 0.60% 0.50% 0.35% 0.60% Portfolio turnover rate .......................... 67% 50% 46% 56% 51%
YEAR ENDED FOR THE PERIOD ---------------------------------------------- 1/30/97* TO 12/31/00 12/31/99 12/31/98 12/31/97 OPEN SHARES ------------ ---------------- ------------ --------------- Net asset value, beginning of period ............. $ 16.51 $ 17.35 $ 20.02 $ 18.75 ------- -------- ------- ------- Income (loss) from investment operations: Net investment income (loss) (c) ................ 0.04 0.06 0.03 0.01 Net realized and unrealized gain (loss) ......... 2.45 0.16 (d) (2.60) 4.61 ------- -------- ------- ------- Total from investment operations ................ 2.49 0.22 (2.57) 4.62 ------- -------- ------- ------- Less distributions from and in excess of: Net investment income ........................... (0.15) (0.08) -- -- Net realized gain ............................... (0.81) (0.98) (0.10) (3.35) ------- -------- ------- ------- Total distributions ............................. (0.96) (1.06) (0.10) (3.35) ------- -------- ------- ------- Net asset value, end of period ................... $ 18.04 $ 16.51 $ 17.35 $ 20.02 ======= ======== ======= ======= TOTAL RETURN (a) ................................. 15.6% 1.5% (12.9)% 25.6% RATIOS AND SUPPLEMENTAL DATA: Net assets, end of period (in thousands) ......... $67,717 $ 86,413 $93,547 $46,097 Ratios to average net assets: Net expenses (b) ................................ 1.12% 1.09% 1.09% 1.14% Gross expenses (b) .............................. 1.12% 1.09% 1.09% 1.23% Net investment income (b) ....................... 0.24% 0.33% 0.21% 0.12% Portfolio turnover rate .......................... 67% 50% 46% 56%
SEE NOTES TO FINANCIAL HIGHLIGHTS. THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS. 84 ================================================================================ THE LAZARD FUNDS, INC. FINANCIAL HIGHLIGHTS (CONTINUED) SELECTED DATA FOR A SHARE OF CAPITAL STOCK OUTSTANDING THROUGHOUT EACH PERIOD: -------------------------------------------------------------------------------- LAZARD GLOBAL EQUITY PORTFOLIO
YEAR ENDED FOR THE PERIOD ----------------------------------------------------- 1/4/96* TO 12/31/00 12/31/99 12/31/98 12/31/97 12/31/96 INSTITUTIONAL SHARES -------------- ------------ ------------ ------------ --------------- Net asset value, beginning of period ............. $ 14.56 $ 13.14 $ 11.91 $ 11.48 $ 10.00 -------- ------- ------- ------- ------- Income (loss) from investment operations: Net investment income (loss) (c) ................ 0.09 0.19 0.10 0.14 0.09 Net realized and unrealized gain (loss) ......... (1.49) 1.95 1.90 1.58 1.49 -------- ------- ------- ------- ------- Total from investment operations ................ (1.40) 2.14 2.00 1.72 1.58 -------- ------- ------- ------- ------- Less distributions from and in excess of: Net investment income ........................... (0.07) (0.21) (0.08) (0.15) (0.10) Net realized gain ............................... (0.68) (0.51) (0.69) (1.14) -- -------- ------- ------- ------- ------- Total distributions ............................. (0.75) (0.72) (0.77) (1.29) (0.10) -------- ------- ------- ------- ------- Net asset value, end of period ................... $ 12.41 $ 14.56 $ 13.14 $ 11.91 $ 11.48 ======== ======= ======= ======= ======= TOTAL RETURN (a) ................................. (9.5)% 16.4% 17.1% 15.3% 15.8% RATIOS AND SUPPLEMENTAL DATA: Net assets, end of period (in thousands) ......... $104,787 $63,557 $17,710 $10,359 $ 9,784 Ratios to average net assets: Net expenses (b) ................................ 1.05% 1.05% 1.05% 1.05% 1.05% Gross expenses (b) .............................. 1.06% 1.21% 2.18% 2.55% 5.06% Net investment income (b) ....................... 0.69% 1.35% 1.07% 1.02% 1.70% Portfolio turnover rate .......................... 47% 43% 48% 64% 74%
YEAR ENDED FOR THE PERIOD ------------------------------------------- 1/30/97* TO 12/31/00 12/31/99 12/31/98 12/31/97 OPEN SHARES ------------- ------------ ------------ --------------- Net asset value, beginning of period ............. $ 14.56 $ 13.16 $ 11.92 $ 11.31 --------- --------- --------- --------- Income (loss) from investment operations: Net investment income (loss) (c) ................ 0.06 0.13 0.09 0.08 Net realized and unrealized gain (loss) ......... (1.49) 1.97 1.88 1.78 --------- --------- --------- --------- Total from investment operations ................ (1.43) 2.10 1.97 1.86 --------- --------- --------- --------- Less distributions from and in excess of: Net investment income ........................... (0.03) (0.19) (0.04) (0.11) Net realized gain ............................... (0.68) (0.51) (0.69) (1.14) --------- --------- --------- --------- Total distributions ............................. (0.71) (0.70) (0.73) (1.25) --------- --------- --------- --------- Net asset value, end of period ................... $ 12.42 $ 14.56 $ 13.16 $ 11.92 ========= ========= ========= ========= TOTAL RETURN (a) ................................. (9.7)% 16.1% 16.8% 16.7% RATIOS AND SUPPLEMENTAL DATA: Net assets, end of period (in thousands) ......... $ 4,588 $ 6,262 $ 4,824 $ 2,290 Ratios to average net assets: Net expenses (b) ................................ 1.35% 1.35% 1.35% 1.35% Gross expenses (b) .............................. 1.66% 1.80% 2.85% 4.23% Net investment income (b) ....................... 0.42% 0.95% 0.77% 0.67% Portfolio turnover rate .......................... 47% 43% 48% 64%
SEE NOTES TO FINANCIAL HIGHLIGHTS THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS. 85 ================================================================================ THE LAZARD FUNDS, INC. FINANCIAL HIGHLIGHTS (CONTINUED) SELECTED DATA FOR A SHARE OF CAPITAL STOCK OUTSTANDING THROUGHOUT EACH PERIOD: -------------------------------------------------------------------------------- LAZARD INTERNATIONAL EQUITY PORTFOLIO
YEAR ENDED YEAR ENDED ------------------------------- ----------------------------------------------- 12/31/00 12/31/99 12/31/98 12/31/97 12/31/96 INSTITUTIONAL SHARES --------------- --------------- --------------- --------------- --------------- Net asset value, beginning of period ............. $ 17.29 $ 15.23 $ 13.97 $ 13.62 $ 12.50 ---------- ---------- ---------- ---------- ---------- Income (loss) from investment operations: Net investment income (loss) (c) ................ 0.15 0.34 0.18 0.22 0.17 Net realized and unrealized gain (loss) ......... (2.01) 3.25 2.03 1.40 1.76 ---------- ---------- ---------- ---------- ---------- Total from investment operations ................ (1.86) 3.59 2.21 1.62 1.93 ---------- ---------- ---------- ---------- ---------- Less distributions from and in excess of: Net investment income ........................... (0.17) (0.54) (0.14) (0.34) (0.19) Net realized gain ............................... (1.80) (0.99) (0.81) (0.93) (0.62) ---------- ---------- ---------- ---------- ---------- Total distributions ............................. (1.97) (1.53) (0.95) (1.27) (0.81) ---------- ---------- ---------- ---------- ---------- Net asset value, end of period ................... $ 13.46 $ 17.29 $ 15.23 $ 13.97 $ 13.62 ========== ========== ========== ========== ========== TOTAL RETURN (a) ................................. (10.6)% 24.1% 16.0% 11.8% 15.6% RATIOS AND SUPPLEMENTAL DATA: Net assets, end of period (in thousands) ......... $3,001,933 $3,584,093 $2,879,289 $2,099,724 $1,816,173 Ratios to average net assets: Net expenses .................................... 0.88% 0.88% 0.90% 0.89% 0.91% Gross expenses .................................. 0.88% 0.88% 0.90% 0.89% 0.91% Net investment income ........................... 0.97% 2.09% 1.37% 1.18% 1.93% Portfolio turnover rate .......................... 51% 35% 41% 37% 39%
YEAR ENDED FOR THE PERIOD ------------------------------------------ 1/23/97* TO 12/31/00 12/31/99 12/31/98 12/31/97 OPEN SHARES ------------ ------------ ------------ --------------- Net asset value, beginning of period ............. $ 17.28 $ 15.23 $ 13.95 $ 13.29 -------- -------- -------- -------- Income (loss) from investment operations: Net investment income (loss) (c) ................ 0.10 0.31 0.18 0.16 Net realized and unrealized gain (loss) ......... (2.02) 3.22 2.00 1.71 -------- -------- -------- -------- Total from investment operations ................ (1.92) 3.53 2.18 1.87 -------- -------- -------- -------- Less distributions from and in excess of: Net investment income ........................... (0.15) (0.49) (0.09) (0.28) Net realized gain ............................... (1.80) (0.99) (0.81) (0.93) -------- -------- -------- -------- Total distributions ............................. (1.95) (1.48) (0.90) (1.21) -------- -------- -------- -------- Net asset value, end of period ................... $ 13.41 $ 17.28 $ 15.23 $ 13.95 ======== ======== ======== ======== TOTAL RETURN (a) ................................. (11.0)% 23.7% 15.8% 14.1% RATIOS AND SUPPLEMENTAL DATA: Net assets, end of period (in thousands) ......... $147,226 $138,131 $ 47,303 $ 10,794 Ratios to average net assets: Net expenses (b) ................................ 1.15% 1.16% 1.24% 1.25% Gross expenses (b) .............................. 1.15% 1.16% 1.24% 1.61% Net investment income (b) ....................... 0.66% 1.87% 1.02% 0.37% Portfolio turnover rate .......................... 51% 35% 41% 37%
SEE NOTES TO FINANCIAL HIGHLIGHTS THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS. 86 ================================================================================ THE LAZARD FUNDS, INC. FINANCIAL HIGHLIGHTS (CONTINUED) SELECTED DATA FOR A SHARE OF CAPITAL STOCK OUTSTANDING THROUGHOUT EACH PERIOD: -------------------------------------------------------------------------------- LAZARD INTERNATIONAL SMALL CAP PORTFOLIO
YEAR ENDED --------------------------------------------------------------------------- 12/31/00 12/31/99 12/31/98 12/31/97 12/31/96 INSTITUTIONAL SHARES -------------- ------------ ------------ ------------ ------------- Net asset value, beginning of period ............. $ 14.12 $ 11.40 $ 11.69 $ 11.93 $ 10.52 -------- -------- -------- -------- -------- Income (loss) from investment operations: Net investment income (loss) (c) ................ 0.16 0.14 0.05 0.07 0.08 Net realized and unrealized gain (loss) ......... (0.81) 2.81 0.83 (0.03) 1.55 -------- -------- -------- -------- -------- Total from investment operations ................ (0.65) 2.95 0.88 0.04 1.63 -------- -------- -------- -------- -------- Less distributions from and in excess of: Net investment income ........................... (0.11) (0.12) (0.05) (0.07) (0.08) Net realized gain ............................... (0.79) (0.11) (1.12) (0.21) (0.14) -------- -------- -------- -------- -------- Total distributions ............................. (0.90) (0.23) (1.17) (0.28) (0.22) -------- -------- -------- -------- -------- Net asset value, end of period ................... $ 12.57 $ 14.12 $ 11.40 $ 11.69 $ 11.93 ======== ======== ======== ======== ======== TOTAL RETURN (a) ................................. (4.4)% 26.1% 7.6% 0.3% 15.6% RATIOS AND SUPPLEMENTAL DATA: Net assets, end of period (in thousands) ......... $341,808 $217,684 $177,779 $141,695 $126,973 Ratios to average net assets: Net expenses .................................... 0.98% 1.01% 1.04% 1.09% 1.12% Gross expenses .................................. 0.98% 1.01% 1.04% 1.09% 1.12% Net investment income ........................... 1.13% 1.17% 0.81% 0.73% 1.67% Portfolio turnover rate .......................... 43% 50% 56% 63% 101%
YEAR ENDED FOR THE PERIOD ------------------------------------------- 2/13/97* TO 12/31/00 12/31/99 12/31/98 12/31/97 OPEN SHARES ------------- ------------ ------------ --------------- Net asset value, beginning of period ............. $ 14.06 $ 11.38 $ 11.69 $ 12.32 ------- ------- ------- ------- Income (loss) from investment operations: Net investment income (loss) (c) ................ 0.10 0.09 0.01 0.02 Net realized and unrealized gain (loss) ......... (0.80) 2.80 0.83 (0.42) ------- ------- ------- ------- Total from investment operations ................ (0.70) 2.89 0.84 (0.40) ------- ------- ------- ------- Less distributions from and in excess of: Net investment income ........................... (0.04) (0.10) (0.03) (0.02) Net realized gain ............................... (0.79) (0.11) (1.12) (0.21) ------- ------- ------- ------- Total distributions ............................. (0.83) (0.21) (1.15) (0.23) ------- ------- ------- ------- Net asset value, end of period ................... $ 12.53 $ 14.06 $ 11.38 $ 11.69 ======= ======= ======= ======= TOTAL RETURN (a) ................................. (4.9)% 25.6% 7.2% (3.2)% RATIOS AND SUPPLEMENTAL DATA: Net assets, end of period (in thousands) ......... $ 1,649 $ 2,441 $ 2,646 $ 1,873 Ratios to average net assets: Net expenses (b) ................................ 1.43% 1.43% 1.43% 1.43% Gross expenses (b) .............................. 2.27% 2.12% 1.93% 3.39% Net investment income (b) ....................... 0.68% 0.77% 0.43% 0.34% Portfolio turnover rate .......................... 43% 50% 56% 63%
SEE NOTES TO FINANCIAL HIGHLIGHTS THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS. 87 ================================================================================ THE LAZARD FUNDS, INC. FINANCIAL HIGHLIGHTS (CONTINUED) SELECTED DATA FOR A SHARE OF CAPITAL STOCK OUTSTANDING THROUGHOUT EACH PERIOD: -------------------------------------------------------------------------------- LAZARD EMERGING MARKETS PORTFOLIO
YEAR ENDED -------------------------------------------------------------------------- 12/31/00 12/31/99 12/31/98 12/31/97 12/31/96 INSTITUTIONAL SHARES ------------ ------------ ------------ -------------- ------------ Net asset value, beginning of period ............. $ 10.70 $ 6.94 $ 9.20 $ 11.21 $ 9.24 -------- -------- -------- -------- -------- Income (loss) from investment operations: Net investment income (loss) (c) ................ 0.06 0.09 0.10 0.10 0.07 Net realized and unrealized gain (loss) ......... (3.22) 3.77 (2.26) (1.18) 2.11 -------- -------- -------- -------- -------- Total from investment operations ................ (3.16) 3.86 (2.16) (1.08) 2.18 -------- -------- -------- -------- -------- Less distributions from and in excess of: Net investment income ........................... (0.02) (0.10) (0.10) (0.09) (0.08) Net realized gain ............................... -- -- -- (0.84) (0.13) -------- -------- -------- -------- -------- Total distributions ............................. (0.02) (0.10) (0.10) (0.93) (0.21) -------- -------- -------- -------- -------- Net asset value, end of period ................... $ 7.52 $ 10.70 $ 6.94 $ 9.20 $ 11.21 ======== ======== ======== ======== ======== TOTAL RETURN (a) ................................. (29.5)% 55.8% (23.5)% (9.8)% 23.6% RATIOS AND SUPPLEMENTAL DATA: Net assets, end of period (in thousands) ......... $317,691 $465,278 $298,033 $236,340 $145,328 Ratios to average net assets: Net expenses .................................... 1.26% 1.24% 1.28% 1.32% 1.38% Gross expenses .................................. 1.27% 1.25% 1.29% 1.33% 1.48% Net investment income ........................... 0.62% 1.05% 1.84% 1.26% 1.40% Portfolio turnover rate .......................... 72% 46% 36% 40% 51%
YEAR ENDED FOR THE PERIOD ------------------------------------------ 1/8/97* TO 12/31/00 12/31/99 12/31/98 12/31/97 OPEN SHARES ------------ ------------ ------------ --------------- Net asset value, beginning of period ............. $ 10.74 $ 6.97 $ 9.20 $ 11.45 ------- ------- ------- ------- Income (loss) from Investment operations: Net investment income (loss) (c) ................ 0.03 0.06 0.11 0.07 Net realized and unrealized gain (loss) ......... (3.23) 3.79 (2.26) (1.42) ------- ------- ------- ------- Total from investment operations ................ (3.20) 3.85 (2.15) (1.35) ------- ------- ------- ------- Less distributions from and in excess of: Net investment income ........................... -- (0.08) (0.08) (0.07) Net realized gain ............................... -- -- -- (0.83) ------- ------- ------- ------- Total distributions ............................. -- (0.08) (0.08) (0.90) ------- ------- ------- ------- Net asset value, end of period ................... $ 7.54 $ 10.74 $ 6.97 $ 9.20 ======= ======= ======= ======= TOTAL RETURN (a) ................................. (29.8)% 55.3% (23.3)% (12.0)% RATIOS AND SUPPLEMENTAL DATA: Net assets, end of period (in thousands) ......... $ 5,459 $10,491 $ 8,191 $ 7,769 Ratios to average net assets: Net expenses (b) ................................ 1.60% 1.60% 1.60% 1.60% Gross expenses (b) .............................. 1.80% 1.75% 1.76% 1.93% Net investment income (b) ....................... 0.30% 0.73% 1.54% 1.01% Portfolio turnover rate .......................... 72% 46% 36% 40%
SEE NOTES TO FINANCIAL HIGHLIGHTS. THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS. 88 -------------------------------------------------------------------------------- THE LAZARD FUNDS, INC. FINANCIAL HIGHLIGHTS (CONTINUED) SELECTED DATA FOR A SHARE OF CAPITAL STOCK OUTSTANDING THROUGHOUT EACH PERIOD: -------------------------------------------------------------------------------- LAZARD BOND PORTFOLIO
YEAR ENDED ------------------------------------------------------------------------ 12/31/00 12/31/99 12/31/98 12/31/97 12/31/96 INSTITUTIONAL SHARES ------------ ------------- ------------ ------------ ----------- Net asset value, beginning of period ............. $ 9.29 $ 9.89 $ 10.03 $ 9.88 $ 10.10 -------- -------- ------- ------- ------- Income (loss) from investment operations: Net investment income (loss) (c) ................ 0.59 0.55 0.55 0.59 0.56 Net realized and unrealized gain (loss) ......... 0.08 (0.60) 0.01 0.23 (0.14) -------- ------- ------- ------- ------- Total from investment operations ................ 0.67 (0.05) 0.56 0.82 0.42 -------- ------- ------- ------- ------- Less distributions from and in excess of: Net investment income ........................... (0.59) (0.55) (0.55) (0.60) (0.57) Net realized gain ............................... -- -- (0.15) (0.07) (0.07) -------- ------- ------- ------- ------- Total distributions ............................. (0.59) (0.55) (0.70) (0.67) (0.64) -------- ------- ------- ------- ------- Net asset value, end of period ................... $ 9.37 $ 9.29 $ 9.89 $ 10.03 $ 9.88 ======== ======= ======= ======= ======= TOTAL RETURN (a) ................................. 7.5% (0.5)% 5.8% 8.6% 4.4% RATIOS AND SUPPLEMENTAL DATA: Net assets, end of period (in thousands) ......... $54,847 $91,557 $100,397 $92,428 $69,906 Ratios to average net assets: Net expenses .................................... 0.82% 0.76% 0.78% 0.80% 0.80% Gross expenses .................................. 0.82% 0.76% 0.79% 0.81% 0.88% Net investment income ........................... 6.38% 5.74% 5.45% 5.81% 5.77% Portfolio turnover rate .......................... 355% 549% 335% 447% 460%
YEAR ENDED FOR THE PERIOD ------------------------------------------- 3/5/97* TO 12/31/00 12/31/99 12/31/98 12/31/97 OPEN SHARES ------------ ------------- ------------ --------------- Net asset value, beginning of period ............. $ 9.29 $ 9.88 $ 10.02 $ 9.86 ------- ------- ------- ------- Income (loss) from investment operations: Net investment income (loss) (c) ................ 0.57 0.51 0.52 0.46 Net realized and unrealized gain (loss) ......... 0.08 (0.58) 0.01 0.24 ------- ------- ------- ------- Total from investment operations ................ 0.65 (0.07) 0.53 0.70 ------- ------- ------- ------- Less distributions from and in excess of: Net investment income ........................... (0.57) (0.52) (0.52) (0.47) Net realized gain ............................... -- -- (0.15) (0.07) ------- ------- ------- ------- Total distributions ............................. (0.57) (0.52) (0.67) (0.54) ------- ------- ------- ------- Net asset value, end of period ................... $ 9.37 $ 9.29 $ 9.88 $ 10.02 ======= ======= ======= ======= TOTAL RETURN (a) ................................. 7.3% (0.8)% 5.4% 7.2% RATIOS AND SUPPLEMENTAL DATA: Net assets, end of period (in thousands) ......... $11,457 $11,605 $15,226 $ 7,283 Ratios to average net assets: Net expenses (b) ................................ 1.10% 1.10% 1.10% 1.10% Gross expenses (b) .............................. 1.27% 1.15% 1.21% 1.49% Net investment income (b) ....................... 6.13% 5.37% 5.11% 5.46% Portfolio turnover rate .......................... 355% 549% 335% 447%
SEE NOTES TO FINANCIAL HIGHLIGHTS. THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS. 89 -------------------------------------------------------------------------------- THE LAZARD FUNDS, INC. FINANCIAL HIGHLIGHTS (CONTINUED) SELECTED DATA FOR A SHARE OF CAPITAL STOCK OUTSTANDING THROUGHOUT EACH PERIOD: -------------------------------------------------------------------------------- LAZARD HIGH YIELD PORTFOLIO
YEAR ENDED FOR THE PERIOD --------------------------- 1/2/98* TO 12/31/00 12/31/99 12/31/98 INSTITUTIONAL SHARES ------------ ------------ --------------- Net asset value, beginning of period ............. $ 8.77 $ 9.42 $ 10.00 ------- ------- ------- Income (loss) from investment operations: Net investment income (loss) (c) ................ 0.96 0.92 0.88 Net realized and unrealized gain (loss) ......... (2.20) (0.65) (0.57) ------- ------- ------- Total from investment operations ................ (1.24) 0.27 0.31 ------- ------- ------- Less distributions from and in excess of: Net investment income ........................... (0.96) (0.92) (0.89) Net realized gain ............................... -- -- -- ------- ------- ------- Total distributions ............................. (0.96) (0.92) (0.89) ------- ------- ------- Net asset value, end of period ................... $ 6.57 $ 8.77 $ 9.42 ======= ======= ======= TOTAL RETURN (a) ................................. (15.2)% 2.9% 2.9% RATIOS AND SUPPLEMENTAL DATA: Net assets, end of period (in thousands) ......... $65,752 $83,664 $41,935 Ratios to average net assets: Net expenses (b) ................................ 0.75% 0.94% 1.05% Gross expenses (b) .............................. 1.00% 1.06% 1.55% Net investment income (b) ....................... 12.24% 10.08% 8.87% Portfolio turnover rate .......................... 148% 190% 418%
YEAR ENDED FOR THE PERIOD --------------------------- 2/24/98* TO 12/31/00 12/31/99 12/31/98 OPEN SHARES ------------ ------------ --------------- Net asset value, beginning of period ............. $ 8.78 $ 9.42 $ 10.37 ------- ------- -------- Income (loss) from investment operations: Net investment income (loss) (c) ................ 0.94 0.90 0.72 Net realized and unrealized gain (loss) ......... (2.21) (0.65) ( 0.94) ------- ------- -------- Total from investment operations ................ (1.27) 0.25 ( 0.22) ------- ------- -------- Less distributions from and in excess of: Net investment income ........................... (0.94) (0.89) ( 0.73) Net realized gain ............................... -- -- -- ------- ------- -------- Total distributions ............................. (0.94) (0.89) ( 0.73) ------- ------- -------- Net asset value, end of period ................... $ 6.57 $ 8.78 $ 9.42 ======= ======= ======== TOTAL RETURN (a) ................................. (15.5)% 2.7% (2.2)% RATIOS AND SUPPLEMENTAL DATA: Net assets, end of period (in thousands) ......... $13,552 $ 1,305 $ 949 Ratios to average net assets: Net expenses (b) ................................ 1.05% 1.22% 1.35% Gross expenses (b) .............................. 1.38% 2.92% 9.77% Net investment income (b) ....................... 12.10% 9.89% 8.59% Portfolio turnover rate .......................... 148% 190% 418%
SEE NOTES TO FINANCIAL HIGHLIGHTS. THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS. 90 -------------------------------------------------------------------------------- THE LAZARD FUNDS, INC. FINANCIAL HIGHLIGHTS (CONTINUED) SELECTED DATA FOR A SHARE OF CAPITAL STOCK OUTSTANDING THROUGHOUT EACH PERIOD: -------------------------------------------------------------------------------- LAZARD INTERNATIONAL FIXED-INCOME PORTFOLIO
YEAR ENDED --------------------------------------------------------------------------- 12/31/00 12/31/99 12/31/98 12/31/97 12/31/96 INSTITUTIONAL SHARES ------------- ------------- ------------ -------------- ----------- Net asset value, beginning of period ............. $ 10.19 $ 10.71 $ 9.63 $ 10.78 $ 10.85 ------- ------- -------- -------- -------- Income (loss) from investment operations: Net investment income (loss) (c) ................ 0.36 0.36 0.32 0.40 0.54 Net realized and unrealized gain (loss) ......... (0.83) (0.68) 0.98 (1.05) 0.03 ------- ------- -------- -------- -------- Total from investment operations ................ (0.47) (0.32) 1.30 (0.65) 0.57 ------- ------- -------- -------- -------- Less distributions from and in excess of: Net investment income ........................... -- -- (0.22) (0.13) (0.59) Net realized gain ............................... -- (0.08) -- (0.12) (0.05) Capital ......................................... (0.12) (0.12) -- (0.25) -- ------- ------- -------- -------- -------- Total distributions ............................. (0.12) (0.20) (0.22) (0.50) (0.64) ------- ------- -------- -------- -------- Net asset value, end of period ................... $ 9.60 $ 10.19 $ 10.71 $ 9.63 $ 10.78 ======= ======= ======== ======== ======== TOTAL RETURN (a) ................................. (4.7)% (2.9)% 13.2% (5.6)% 5.5% RATIOS AND SUPPLEMENTAL DATA: Net assets, end of period (in thousands) ......... $63,409 $73,871 $115,500 $110,185 $88,430 Ratios to average net assets: Net expenses .................................... 1.09% 1.09% 1.09% 1.06% 1.05% Gross expenses .................................. 1.19% 1.13% 1.10% 1.10% 1.21% Net investment income ........................... 3.79% 3.55% 4.27% 5.13% 5.54% Portfolio turnover rate .......................... 103% 139% 187% 166% 242%
YEAR ENDED FOR THE PERIOD -------------------------------------------- 1/8/97* TO 12/31/00 12/31/99 12/31/98 12/31/97 OPEN SHARES ------------- ------------- ------------ --------------- Net asset value, beginning of period ............. $ 10.14 $ 10.69 $ 9.63 $10.64 ------- ------- ------- ------- Income (loss) from investment operations: Net investment income (loss) (c) ................ 0.33 0.34 0.31 0.43 Net realized and unrealized gain (loss) ......... (0.82) (0.69) 0.96 (0.98) ------- ------- ------- ------- Total from investment operations ................ (0.49) (0.35) 1.27 (0.55) ------- ------- ------- ------- Less distributions from and in excess of: Net investment income ........................... -- -- (0.21) (0.08) Net realized gain ............................... -- (0.08) -- (0.12) Capital ......................................... (0.12) (0.12) -- (0.26) ------- ------- ------- ------- Total distributions ............................. (0.12) (0.20) (0.21) (0.46) ------- ------- ------- ------- Net asset value, end of period ................... $ 9.53 $ 10.14 $ 10.69 $ 9.63 ======= ======== ======= ======== TOTAL RETURN (a) ................................. (4.9)% (3.2)% 12.9% (4.8)% RATIOS AND SUPPLEMENTAL DATA: Net assets, end of period (in thousands) ......... $23,310 $ 3,783 $4,751 $2,772 Ratios to average net assets: Net expenses (b) ................................ 1.35% 1.35% 1.35% 1.35% Gross expenses (b) .............................. 1.55% 1.91% 1.92% 2.71% Net investment income (b) ....................... 3.54% 3.30% 4.01% 4.68% Portfolio turnover rate .......................... 103% 139% 187% 166%
SEE NOTES TO FINANCIAL HIGHLIGHTS. THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS. 91 -------------------------------------------------------------------------------- THE LAZARD FUNDS, INC. FINANCIAL HIGHLIGHTS (CONTINUED) SELECTED DATA FOR A SHARE OF CAPITAL STOCK OUTSTANDING THROUGHOUT EACH PERIOD: -------------------------------------------------------------------------------- LAZARD STRATEGIC YIELD PORTFOLIO
YEAR ENDED ------------------------------------------------------------------------ 12/31/00 12/31/99 12/31/98 12/31/97 12/31/96 INSTITUTIONAL SHARES ------------ ------------ ------------ ------------ ------------ Net asset value, beginning of period ............. $ 8.83 $ 9.01 $ 9.66 $ 10.01 $ 9.52 -------- -------- -------- -------- -------- Income (loss) from investment operations: Net investment income (loss) (c) ................ 0.59 0.61 0.76 0.81 0.76 Net realized and unrealized gain (loss) ......... (0.49) (0.18) (0.69) (0.28) 0.50 -------- -------- -------- -------- -------- Total from investment operations ................ 0.10 0.43 0.07 0.53 1.26 -------- -------- -------- -------- -------- Less distributions from and in excess of: Net investment income ........................... (0.97) (0.61) (0.44) (0.82) (0.77) Net realized gain ............................... -- -- -- (0.06) -- Capital ......................................... -- -- (0.28) -- -- -------- -------- -------- -------- -------- Total distributions ............................. (0.97) (0.61) (0.72) (0.88) (0.77) -------- -------- -------- -------- -------- Net asset value, end of period ................... $ 7.96 $ 8.83 $ 9.01 $ 9.66 $ 10.01 ======== ======== ======== ======== ======== TOTAL RETURN (a) ................................. 1.1% 4.9% 0.8% 5.3% 13.7% RATIOS AND SUPPLEMENTAL DATA: Net assets, end of period (in thousands) ......... $240,162 $306,116 $397,599 $399,452 $199,083 Ratios to average net assets: Net expenses .................................... 0.93% 0.91% 0.90% 0.94% 1.08% Gross expenses .................................. 0.93% 0.91% 0.90% 0.95% 1.08% Net investment income ........................... 6.82% 6.82% 6.94% 7.42% 7.88% Portfolio turnover rate .......................... 192% 257% 276% 161% 189%
YEAR ENDED FOR THE PERIOD ------------------------------------------ 1/23/97* TO 12/31/00 12/31/99 12/31/98 12/31/97 OPEN SHARES ------------ ------------ ------------ --------------- Net asset value, beginning of period ............. $ 8.83 $ 9.02 $ 9.66 $ 10.08 ------- ------- ------- ------- Income (loss) from investment operations: Net investment income (loss) (c) ................ 0.55 0.58 0.73 0.72 Net realized and unrealized gain (loss) ......... (0.49) (0.19) (0.69) (0.35) ------- ------- ------- ------- Total from investment operations ................ 0.06 0.39 0.04 0.37 ------- ------- ------- ------- Less distributions from and in excess of: Net investment income ........................... (0.93) (0.58) (0.40) (0.73) Net realized gain ............................... -- -- -- (0.06) Capital ......................................... -- -- (0.28) -- ------- ------- ------- ------- Total distributions ............................. (0.93) (0.58) (0.68) (0.79) ------- ------- ------- ------- Net asset value, end of period ................... $ 7.96 $ 8.83 $ 9.02 $ 9.66 ======= ======= ======= ======= TOTAL RETURN (a) ................................. 0.7% 4.4% 0.4% 3.8% RATIOS AND SUPPLEMENTAL DATA: Net assets, end of period (in thousands) ......... $ 9,633 $16,035 $22,460 $15,300 Ratios to average net assets: Net expenses (b) ................................ 1.34% 1.27% 1.28% 1.39% Gross expenses (b) .............................. 1.34% 1.27% 1.28% 1.44% Net investment income (b) ....................... 6.40% 6.49% 6.60% 6.92% Portfolio turnover rate .......................... 192% 257% 276% 161%
SEE NOTES TO FINANCIAL HIGHLIGHTS. THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS. 92 -------------------------------------------------------------------------------- THE LAZARD FUNDS, INC. FINANCIAL HIGHLIGHTS (CONCLUDED) SELECTED DATA FOR A SHARE OF CAPITAL STOCK OUTSTANDING THROUGHOUT THE PERIOD: -------------------------------------------------------------------------------- LAZARD MORTGAGE PORTFOLIO FOR THE PERIOD 12/29/00* TO 12/31/00 INSTITUTIONAL SHARES ------------------- Net asset value, beginning of period ............. $ 10.00 --------- Income (loss) from Investment operations: Net investment income (loss) (c) ................ --(e) Net realized and unrealized gain (loss) ......... -- --------- Total from investment operations ................ -- --------- Less distributions from and in excess of: Net investment income ........................... --(e) Net realized gain ............................... -- --------- Total distributions ............................. -- --------- Net asset value, end of period ................... $ 10.00 ========= TOTAL RETURN (a) ................................. 0.04% RATIOS AND SUPPLEMENTAL DATA: Net assets, end of period (in thousands) ......... $ 100 Ratios to average net assets: Net expenses (b) ................................ 0.65% Gross expenses (b) .............................. 570.50%(f) Net investment income (b) ....................... 4.38% Portfolio turnover rate .......................... 0% SEE NOTES TO FINANCIAL HIGHLIGHTS. THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS. 93 -------------------------------------------------------------------------------- THE LAZARD FUNDS, INC. NOTES TO FINANCIAL HIGHLIGHTS -------------------------------------------------------------------------------- * Commencement of operations. (a) Total returns are historical and assume changes in share price, reinvestment of all dividends and distributions, and no sales charge. Periods of less than one year are not annualized. (b) Annualized for periods of less than one year. (c) For period ended 12/31/00 and year ended 12/31/99, net investment income has been computed using the average shares method. (d) The amount shown for a share outstanding did not correspond with the aggregate net gain on investments for the period due to timing of sales and repurchases of Portfolio Shares in relation to fluctuating market values of the investments of the Portfolio. (e) Amount is less than $0.01 per share. (f) Gross expense ratio is the result of the Portfolio being in existence for three days during the period ended 12/31/00. THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS. 94 -------------------------------------------------------------------------------- THE LAZARD FUNDS, INC. NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 2000 -------------------------------------------------------------------------------- 1. ORGANIZATION The Lazard Funds, Inc. (the "Fund") was incorporated in Maryland on May 17, 1991 and is registered under the Investment Company Act of 1940, as amended (the "Act"), as a no-load, open-end management investment company. The Fund is comprised of twelve portfolios (each referred to as a "Portfolio"), as follows: Lazard Equity Portfolio, Lazard Mid Cap Portfolio, Lazard Small Cap Portfolio, Lazard Global Equity Portfolio, Lazard International Equity Portfolio, Lazard International Small Cap Portfolio, Lazard Emerging Markets Portfolio, Lazard Bond Portfolio, Lazard High Yield Portfolio, Lazard International Fixed-Income Portfolio, Lazard Strategic Yield Portfolio and Lazard Mortgage Portfolio (which commenced operations on December 29, 2000). Effective November 1, 1996, the Board of Directors of the Fund approved the offering of two different classes of shares for the Portfolios-- Institutional Shares and Retail ("Open") Shares. Institutional Shares and Open Shares are identical, except as to minimum investment requirements and the services offered to and expenses borne by each class of shares. As of December 31, 2000, only Institutional Shares have been offered for the Mortgage Portfolio. The Equity Portfolio is operated as a "diversified" fund as defined in the Act. The remaining Portfolios are "non-diversified". 2. SIGNIFICANT ACCOUNTING POLICIES The following is a summary of significant accounting policies: (a) VALUATION OF INVESTMENTS--Market values for equity securities listed on the New York Stock Exchange ("NYSE"), NASDAQ or other U.S. exchanges are based on the last quoted sales prices on the principal exchange on which the security is traded as of the close of regular trading on the NYSE (normally 4:00 p.m. Eastern Time) on each valuation date; securities not traded on the valuation date are valued at the closing bid price. Any securities not listed, for which current over-the-counter market quotations or bids are readily available, are valued at the last quoted bid price or, if available, the mean of two such prices. Securities listed on foreign exchanges are valued at the last quoted sales price; securities not traded on the valuation date are valued at the closing bid price. Bonds and other fixed-income securities are valued on the basis of prices provided by pricing services which are based primarily on institutional-size trading in similar groups of securities, or by using brokers' quotations. Mortgage-backed securities issued by certain government related organizations are valued using pricing services or brokers' quotations based on a matrix system which considers such factors as other security prices, yields and maturities. Debt securities maturing in sixty days or less are valued at amortized cost except where to do so would not accurately reflect their fair value, in which case such securities are valued at fair value as determined in good faith in accordance with procedures adopted by the Board of Directors. Options on stocks and stock indices traded on national securities exchanges are valued as of the close of options trading on such exchanges (which is currently 4:10 p.m. Eastern Time). Securities for which market quotations are not readily available are valued at fair value as determined in good faith using methods approved by the Board of Directors. (b) PORTFOLIO SECURITIES TRANSACTIONS AND INVESTMENT INCOME--Portfolio securities transactions are accounted for on trade date. Realized gains and losses on sales of investments are recorded on a specific identification basis and dividend income is recorded on the ex-dividend date. Interest income is accrued daily. The Portfolios amortize premiums and accrete discounts on fixed-income securities using the effective yield method. (c) REPURCHASE AGREEMENTS--In connection with transactions in repurchase agreements, the Fund's custodian takes possession of the underlying collateral securities, the value or market price of which is at least equal to the principal amount, including interest, of the repurchase transaction. To the extent that any repurchase transaction exceeds one business day, the value of the collateral is marked-to-market on a daily basis to ensure the adequacy of the collateral. In the event of default of the obligation to repurchase, the Portfolio has the right to liquidate the collateral and apply the proceeds in satisfaction of the obligation. Under certain circumstances, such as the default or bankruptcy by the other party to the agreement, realization and/or retention of the collateral or proceeds may be subject to delay due to legal proceedings and the Portfolio may suffer a loss. (d) SECURITIES LENDING--The Portfolios may lend portfolio securities to qualified borrowers in order to earn additional income. The terms of the lending agreements require that loans are secured at all times by cash, U.S. Government securities or irrevocable letters of credit in an amount at least equal to 102% of the market value of domestic securities loaned (105% in the case of foreign securities), plus accrued interest and dividends, determined on a daily basis. Cash collateral received is invested in Navigator Securities Lending Prime Portfolio, a regulated investment company offered by State Street Bank and Trust Company. If the borrower defaults on its obligation to return the securities loaned because of insolvency or other reasons, the Portfolios could experience delays and costs in recovering the securities loaned or in gaining access to the 95 -------------------------------------------------------------------------------- THE LAZARD FUNDS, INC. NOTES TO FINANCIAL STATEMENTS (CONTINUED) DECEMBER 31, 2000 -------------------------------------------------------------------------------- collateral. At December 31, 2000, the value of the securities on loan and corresponding collateral received were as follows: SECURITIES PORTFOLIO LOANED COLLATERAL ---------------------------- ------------- ------------- Global Equity(2) $ 8,906,641 $ 9,323,453 International Equity(1) 35,789,977 37,485,000 International Small Cap(2) 20,070,521 21,292,871 Emerging Markets(2) 80,440,312 84,562,807 (1) COLLATERAL IS U.S. TREASURY OBLIGATIONS. (2) COLLATERAL IS CASH. In accordance with generally accepted accounting principles, the cash collateral received and the payable upon return of the securities on loan are shown on the Statement of Assets and Liabilities of the respective Portfolios. During the year ended December 31, 2000, the following Portfolios earned income from securities lending in the amounts listed below: SECURITIES LENDING PORTFOLIO INCOME ------------------------- ------------------- Equity $ 116 Mid Cap 6 Small Cap 29,271 Global Equity 32,085 International Equity 788,953 International Small Cap 144,978 Emerging Markets 278,454 These amounts are included in interest income on the Statement of Operations of the respective Portfolios. (e) FOREIGN CURRENCY TRANSLATION AND FORWARD FOREIGN CURRENCY CONTRACTS--The accounting records of the Portfolios are maintained in U.S. dollars. Portfolio securities and other assets and liabilities denominated in a foreign currency are translated daily into U.S. dollars at the prevailing rates of exchange. Purchases and sales of securities, income receipts and expense payments are translated into U.S. dollars at the prevailing exchange rates on the respective dates of transactions. The Portfolios do not isolate the portion of operations resulting from changes in foreign exchange rates on investments from the fluctuations arising from changes in their market prices. Such fluctuations are included in net realized and unrealized gain or loss from investments. Net realized gains (losses) from foreign currency transactions represent net foreign currency gains (losses) from forward foreign currency contracts, disposition of foreign currencies, currency gains or losses realized between the trade and settlement dates on securities transactions, and the difference between the amount of net investment income recorded on the Portfolio's accounting records and the U.S. dollar equivalent amounts actually received or paid. Net unrealized foreign currency gains and losses arise from changes in the value of assets and liabilities, other than investments in securities, as a result of changes in exchange rates. A forward foreign currency contract is an agreement between two parties to buy or sell currency at a set price on a future date. Certain Portfolios may enter into forward foreign currency contracts for risk management. Risk management includes hedging strategies which serve to reduce a Portfolio's exposure to foreign currency fluctuations. Such exposure may exist during the period that a foreign denominated investment is held, or during the period between the trade date and settlement date of an investment which has been purchased or sold. Upon entering into these contracts, risks may arise from the potential inability of counterparties to meet the terms of their contracts and from unanticipated movements in the value of the foreign currency relative to the U.S. dollar. The U.S. dollar value of forward foreign currency contracts is determined using forward exchange rates provided by a quotation service. Daily fluctuations in the value of such contracts are recorded as unrealized gains or losses. When the contract is closed, the Portfolio records a realized gain or loss equal to the difference between the value at the time it was opened and the value at the time it was closed. Such gains and losses are disclosed in the realized or unrealized gain (loss) on foreign currency in the accompanying Statements of Operations. (f) FEDERAL INCOME TAXES--The Fund's policy is to continue to have each Portfolio qualify as a regulated investment company under the Internal Revenue Code and to distribute all of its taxable income, including any realized net capital gains, to shareholders. Therefore, no federal income tax provision is required. At December 31, 2000, the following Portfolios had available for federal income tax purposes unused realized capital losses which can be used to offset future realized capital gains as follows: PORTFOLIO EXPIRING 2006 EXPIRING 2007 EXPIRING 2008 ------------------ --------------- --------------- -------------- Emerging Markets $31,081,131 $ 3,337,906 $ -- Bond -- 4,509,552 2,509,149 High Yield 1,150,441 6,288,085 9,656,682 International Fixed-Income -- 513,432 733,222 Strategic Yield 14,900,897 22,094,886 9,399,400 Under current tax law, certain capital and net foreign currency losses realized after October 31 within the taxable year may be deferred and treated as occurring on the first day of the following tax year. For the tax year ended 96 -------------------------------------------------------------------------------- THE LAZARD FUNDS, INC. NOTES TO FINANCIAL STATEMENTS (CONTINUED) DECEMBER 31, 2000 -------------------------------------------------------------------------------- December 31, 2000, the following Portfolios elected to defer net capital and currency losses arising between November 1, 2000 and December 31, 2000, as follows: PORTFOLIO AMOUNT --------- ------ Small Cap $ 1,689,180 Global Equity 1,056,558 International Equity 1,395,138 International Small Cap 8,036,776 Emerging Markets 10,660,849 Bond 252,138 High Yield 5,070,450 International Fixed-Income 74,020 Strategic Yield 7,262,712 (g) DIVIDENDS AND DISTRIBUTIONS--The Fund intends to declare dividends from net investment income daily on shares of Bond Portfolio, High Yield Portfolio, International Fixed-Income Portfolio, Strategic Yield Portfolio and Mortgage Portfolio and to pay such dividends monthly. Dividends from net investment income on shares of Equity Portfolio, Mid Cap Portfolio, Small Cap Portfolio, Global Equity Portfolio, International Equity Portfolio, International Small Cap Portfolio and Emerging Markets Portfolio will be declared and paid annually. During any particular year, net realized gains from investment transactions in excess of available capital loss carryforwards would be taxable to the Portfolio if not distributed. The Portfolios intend to declare and distribute these amounts annually to shareholders; however, to avoid taxation, a second distribution may be required. Income dividends and capital gains distributions are determined in accordance with federal income tax regulations which may differ from generally accepted accounting principles. These differences, which may result in distribution reclassifications, are primarily due to differing treatments of foreign currency transactions. Book and tax differences relating to shareholder distributions will result in reclassifications between investment income-net, realized gains-net, and paid in capital. As a result of these book/tax differences, the Portfolios made the following reclassifications to the capital accounts for the period ended December 31, 2000: INCREASE (DECREASE) ----------------------------------------------------- UNDISTRIBUTED ACCUMULATED INVESTMENT REALIZED INCOME GAIN PORTFOLIO PAID IN CAPITAL (LOSS)-NET (LOSS)-NET --------- --------------- ---------- ---------- Equity $ 3,822,883 $ 20,388 (3,843,271) Mid Cap -- 12,522 (12,522) Small Cap 129,738 (38,740) (90,998) Global Equity (31,048) (49,900) 80,948 INCREASE (DECREASE) --------------------------------------------------------- UNDISTRIBUTED ACCUMULATED INVESTMENT REALIZED INCOME GAIN PORTFOLIO PAID IN CAPITAL (LOSS)-NET (LOSS)-NET --------- --------------- ---------- ---------- International Equity $(3,838,230) $ 36,972,710 $(33,134,480) International Small Cap -- (770,406) 770,406 Emerging Markets (2,775) (540,812) 543,587 Bond (471,061) 383,409 87,652 High Yield -- -- -- International Fixed-Income (1,162,835) (3,053,438) 4,216,273 Strategic Yield -- 1,251,937 (1,251,937) Mortgage (11) 11 -- (h) ORGANIZATIONAL AND OFFERING EXPENSES--Costs incurred by the Fund in connection with its organization and initial offering have been deferred and are being amortized on a straight line basis over a five-year period from the date of commencement of operations of each Portfolio, except in the case of offering and initial registration expenses incurred by Mortgage Portfolio. Those fees are being amortized over a one-year period starting from the date the Portfolio commenced operations. All organizational costs associated with Mortgage Portfolio have been borne by Lazard Asset Management (the "Investment Manager"). In the event that any of the initial shares of any of the Portfolios are redeemed during such amortization period, the appropriate Portfolio will be reimbursed by such holder for any unamortized organizational expenses in the same proportion as the number of shares redeemed bears to the number of initial shares held at the time of redemption. (i) ALLOCATION OF EXPENSES--Expenses not directly chargeable to a specific Portfolio are allocated primarily on the basis of relative net assets. The Portfolios will accrue distribution fees and shareholders' services fees to the respective class. Each Portfolio's income, expenses (other than the fees mentioned above) and realized and unrealized gains and losses are allocated proportionally each day between the classes based upon the relative net assets of each class. (j) EXPENSE REDUCTIONS--Portfolios leaving excess cash in demand deposit accounts may receive credits which are available to offset custody expenses. The Statements of Operations report gross custody expenses, and report the amount of such credits separately as an expense reduction. (k) STRUCTURED INVESTMENTS--Certain Portfolios may invest in structured investments whose values are linked either directly or inversely to changes in foreign currencies, interest rates, commodities, indices, or other underlying instruments. A Portfolio uses these securities to increase or 97 -------------------------------------------------------------------------------- THE LAZARD FUNDS, INC. NOTES TO FINANCIAL STATEMENTS (CONTINUED) DECEMBER 31, 2000 -------------------------------------------------------------------------------- decrease its exposure to different underlying instruments and to gain exposure to markets that might be difficult to invest in through conventional securities. Structured investments may be more volatile than their underlying instruments, but any loss is limited to the amount of the original investment. (l) DELAYED DELIVERY COMMITMENTS--Each Portfolio may purchase or sell securities on a when-issued or forward commitment basis. Payment and delivery may take place a month or more after the date of the transaction. The price of the underlying securities and the date when the securities will be delivered and paid for are fixed at the time the transaction is negotiated. Collateral consisting of liquid securities or cash is segregated in an amount at least equal to these commitments. (m) CROSS CURRENCY SWAPS--The Fund enters into cross currency swap contracts for investment, hedging and risk management purposes. A cross currency swap is an agreement between counterparties to exchange interest rate payments and currencies with an agreement to re-exchange the currencies at a future date. If forecasts of interest rates, exchange rates and other market conditions are incorrect, investment performance will diminish compared to what performance would have been if these investment techniques were not used. Even if the forecasts are correct, there are risks that the positions may correlate imperfectly with the asset and liability being hedged, a liquid secondary market may not always exist or a counterparty to a transaction may not perform. Cross currency swap contracts are marked-to-market daily using market quotations. The change in market value is recorded by the Portfolio as an unrealized gain or loss. The difference between the rates received and paid by the Portfolio constitutes investment income. (n) ESTIMATES--The preparation of financial statements in conformity with generally accepted accounting principles requires the Fund to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of income and expense during the reporting period. Actual results could differ from those estimates. 3. INVESTMENT MANAGEMENT, ADMINISTRATIVE AND DISTRIBUTION AGREEMENTS The Fund has entered into investment management agreements (the "Management Agreements") with Lazard Asset Management, a division of Lazard Fr-res & Co. LLC, on behalf of each Portfolio. Pursuant to the Management Agreements, the Investment Manager will regularly provide the Portfolios with investment research, advice and supervision and furnish continuously an investment program for each Portfolio consistent with its investment objectives and policies, including the purchase, retention and disposition of securities. Each of the Portfolios pays the Investment Manager an investment management fee at the annual rate set forth below as a percentage of the average daily net assets of the relevant Portfolio: PORTFOLIO ANNUAL RATE --------- ----------- Equity 0.75% Mid Cap 0.75 Small Cap 0.75 Global Equity 0.75 International Equity 0.75 International Small Cap 0.75 Emerging Markets 1.00 Bond 0.50 High Yield 0.75 International Fixed-Income 0.75 Strategic Yield 0.75 Mortgage 0.40 The investment management fees are accrued daily and paid monthly. The Investment Manager has voluntarily agreed to reduce its fees and, if necessary, reimburse the following Portfolios if annualized operating expenses exceed the following per-centages of average daily net assets for the respective Shares: INSTITUTIONAL SHARES OPEN SHARES ANNUAL ANNUAL PORTFOLIO OPERATING EXPENSES OPERATING EXPENSES --------- ------------------ ------------------ Mid Cap 1.05% 1.35% Global Equity 1.05 1.35 International Small Cap N/A 1.43 Emerging Markets N/A 1.60 Bond N/A 1.10 High Yield 0.75 1.05 International Fixed-Income 1.09 1.35 Mortgage 0.65 N/A For the period ended December 31, 2000, the Investment Manager waived its management fee/reimbursed the indicated Portfolios for other expenses as follows: INSTITUTIONAL SHARES OPEN SHARES AMOUNT WAIVED/ AMOUNT WAIVED/ PORTFOLIO REIMBURSED REIMBURSED --------- ---------- ---------- Mid Cap $ 92,218 $44,081 Global Equity 5,939 18,927 International Small Cap -- 18,438 Emerging Markets -- 17,500 Bond -- 17,519 High Yield 199,586 49,643 International Fixed-Income 65,735 22,250 Mortgage 4,684 -- The Fund has entered into an administrative agreement with State Street Bank and Trust Company ("State Street") to provide certain administrative services. Each Portfolio 98 -------------------------------------------------------------------------------- THE LAZARD FUNDS, INC. NOTES TO FINANCIAL STATEMENTS (CONTINUED) DECEMBER 31, 2000 -------------------------------------------------------------------------------- bears the cost of such expenses at the annual rate of $37,500, plus $7,500 per additional class, and 0.02% of average daily net assets up to $1 billion plus 0.01% of average daily net assets over $1 billion. State Street has agreed to waive the $37,500 fee for the Mortgage Portfolio until June 30, 2001 or until the portfolio reaches net assets of $50 million, whichever comes first. The Fund has a distribution agreement with Lazard Fr-res & Co. LLC (the "Distributor"). The Distributor acts as distributor for shares of each of the Portfolios and bears the cost of printing and mailing prospectuses to potential investors and of any advertising expenses incurred in connection with distribution of shares. The Distributor provides the Open Shares of each Portfolio with distribution services pursuant to a separate Distribution and Servicing Plan (the "Plan") in accordance with Rule 12b-1 under the Act. Under the Plan, the Distributor is entitled to an asset-based fee to support distribution efforts and/or servicing of Open Shares accounts. Each Portfolio pays a monthly distribution and servicing fee at an annual rate of 0.25% of the average daily net assets of the Portfolio's Open shares for such services under the Plan. The Distributor may make payments to external organizations, such as 401(k) alliance sponsors, discount brokers and bank trust departments for providing these services. Certain Directors of the Fund are Managing Directors of the Investment Manager. The Fund pays each Director who is not an employee or an affiliated person of the Investment Manager its allocated portion of a fixed fee of $30,000 per year, plus $2,500 per meeting attended for the Fund and Lazard Retirement Series, Inc., another multi-portfolio fund advised by the Investment Manager, and reimburses such Directors for travel and other out of pocket expenses. In addition, the Chairman of the Audit Committee for the Fund and Lazard Retirement Series, Inc. also receives an annual fee of $5,000. 4. SECURITIES TRANSACTIONS AND TRANSACTIONS WITH AFFILIATES Purchases and sales of portfolio securities (excluding short-term securities), for the period ended December 31, 2000 were as follows: PORTFOLIO PURCHASES SALES --------- --------- ----- Equity $ 123,586,940 $ 348,646,566 Mid Cap 42,585,937 67,511,676 Small Cap 560,599,385 873,798,480 Global Equity 90,763,791 42,514,878 International Equity 1,651,889,620 1,870,614,518 International Small Cap 255,215,053 119,091,904 Emerging Markets 255,367,910 275,937,255 Bond(1) 281,714,398 321,733,272 PORTFOLIO PURCHASES SALES --------- --------- ----- High Yield $ 150,808,195 $ 131,923,731 International Fixed-Income(2) 84,785,400 71,169,862 Strategic Yield(3) 439,431,165 496,327,198 Mortgage(4) 98,448 -- (1) INCLUDES PURCHASES AND SALES OF U.S. GOVERNMENT SECURITIES OF $256,714,398 AND $286,198,108, RESPECTIVELY. (2) INCLUDES PURCHASES AND SALES OF U.S. GOVERNMENT SECURITIES OF $10,152,366 AND $11,622,787, RESPECTIVELY. (3) INCLUDES PURCHASES AND SALES OF U.S. GOVERNMENT SECURITIES OF $62,460,444 AND $86,618,284, RESPECTIVELY. (4) INCLUDES PURCHASES AND SALES OF U.S. GOVERNMENT SECURITIES OF $98,448 AND $0, RESPECTIVELY. For the year ended December 31, 2000, brokerage commissions were paid to Lazard Freres & Co. LLC for portfolio transactions executed on behalf of the Portfolios as follows: COMMISSIONS PORTFOLIO PAID --------- ---- Equity $18,910 Mid Cap 6,495 Global Equity 5,002 Emerging Markets 275 5. LINE OF CREDIT The Fund has entered into a $50 million Line of Credit Agreement (the "Agreement") with State Street effective April 24, 1996, primarily for temporary or emergency purposes, including the meeting of redemption requests that otherwise might require the untimely disposition of securities. Interest on borrowings is payable at State Street's Cost of Funds plus 0.50%, on an annualized basis. Under this Agreement, the Fund has agreed to pay a fee on the unused portion of the commitment, payable quarterly in arrears. For the twelve month period ended July 30, 2000, the rate was 0.08% per annum. Effective July 31, 2000, the rate is 0.09% per annum. During the year ended December 31, 2000, Emerging Markets Portfolio paid a total of $18,726 in interest, for which the Portfolio was reimbursed by the Investment Manager, and the Fund had borrowings under this Agreement as follows: WEIGHTED MAXIMUM AVERAGE DAILY AVERAGE PORTFOLIO LOAN AMOUNT OF LOAN INTEREST RATE --------- ---- -------------- ------------- Emerging Markets $50,000,000 $35,468,092 6.336% 6. REORGANIZATION On July 30, 1999, Small Cap Portfolio acquired the net assets of Bantam Value Portfolio pursuant to a plan of reorganization approved by Bantam Value Portfolio shareholders on July 16, 1999. The acquisition was accomplished by a tax-free exchange of 1,385,450 Institutional Shares (valued at $26,354,774) and 188,462 Open Shares (valued at $3,571,473) of Small Cap Portfolio for the 2,091,308 Institutional Shares and 285,910 Open 99 -------------------------------------------------------------------------------- THE LAZARD FUNDS, INC. NOTES TO FINANCIAL STATEMENTS (CONCLUDED) DECEMBER 31, 2000 -------------------------------------------------------------------------------- Shares of Bantam Value Portfolio outstanding on July 30, 1999. Bantam Value Portfolio's net assets at that date, $29,926,247, including $902,603 of unrealized depreciation and $377,560 of accumulated realized net loss, were combined with those of Small Cap Portfolio. The aggregate net assets of Small Cap Portfolio and Bantam Value Portfolio immediately before the acquisition were $29,926,247 and $1,250,934,139, respectively. The aggregate net assets of Small Cap Portfolio immediately after the acquisition were $1,280,860,386. For the period January 1, 1999 through July 30, 1999 (acquisition date), Bantam Value Portfolio had a net increase in net assets resulting from operations in the amount of $3,833,373. 100 -------------------------------------------------------------------------------- THE LAZARD FUNDS, INC. REPORT OF INDEPENDENT AUDITORS -------------------------------------------------------------------------------- The Board of Directors and Shareholders The Lazard Funds, Inc. We have audited the accompanying statements of assets and liabilities, including the portfolios of investments, of The Lazard Funds, Inc. [comprised of Lazard Equity Portfolio, Lazard Mid Cap Portfolio, Lazard Small Cap Portfolio, Lazard Global Equity Portfolio, Lazard International Equity Portfolio, Lazard International Small Cap Portfolio, Lazard Emerging Markets Portfolio, Lazard Bond Portfolio, Lazard High Yield Portfolio, Lazard International Fixed-Income Portfolio, Lazard Strategic Yield Portfolio and Lazard Mortgage Portfolio (commenced operations on December 29, 2000)] as of December 31, 2000 and the related statements of operations for the year or period then ended, the statements of changes in net assets for each of the two years in the period then ended or the period from commencement of operations to December 31, 2000, and the financial highlights for each of the periods presented. These financial statements and financial highlights are the responsibility of the Fund's management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. Our procedures included confirmation of securities owned as of December 31, 2000, by correspondence with the custodian and brokers. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements and financial highlights as stated above, present fairly, in all material respects, the financial position of each of the respective portfolios constituting The Lazard Funds, Inc. as of December 31, 2000, the results of their operations for the year or period then ended and changes in their net assets for each of the two years in the period then ended or the period from commencement of operations to December 31, 2000 and the financial highlights for the periods presented in conformity with accounting principles generally accepted in the United States of America. ANCHIN, BLOCK & ANCHIN LLP New York, New York February 2, 2001 101 -------------------------------------------------------------------------------- TAX INFORMATION (UNAUDITED) THE LAZARD FUNDS, INC. YEAR ENDED DECEMBER 31, 2000 The following tax information represents year end disclosures of various tax benefits passed through to shareholders for 2000. The amount of long-term capital gain paid is as follows: PORTFOLIO AMOUNT --------- ------- Equity $37,763,573 Mid Cap -- Small Cap 24,692,935 Global Equity 4,726,883 International Equity 309,826,210 International Small Cap 9,904,272 Emerging Markets -- Bond -- High Yield -- International Fixed-Income -- Strategic Yield -- Mortgage -- Of the distributions made by the following Portfolios, the corresponding percentage represents the amount of each distribution which will qualify for the dividends received deduction available to corporate shareholders. PORTFOLIO PERCENTAGE --------- ---------- Equity 40.67% Mid Cap 15.58 Small Cap 100.00 Global Equity 34.73 International Equity -- International Small Cap 2.97 Emerging Markets -- Bond -- High Yield -- International Fixed-Income -- Strategic Yield 2.93 Mortgage -- The above figures may differ from those cited elsewhere in this report due to differences in the calculations of income and capital gains for Securities and Exchange Commission (book) purposes and Internal Revenue Service (tax) purposes. -------------------------------------------------------------------------------- 102 [THIS PAGE LEFT BLANK INTENTIONALLY] [THIS PAGE LEFT BLANK INTENTIONALLY] THE LAZARD FUNDS, INC. 30 Rockefeller Plaza New York, New York 10112 Telephone: (800) 823-6300 http://www.lazardnet.com INVESTMENT MANAGER Lazard Asset Management 30 Rockefeller Plaza New York, New York 10112 Telephone: (800) 823-6300 DISTRIBUTOR Lazard Freres & Co. LLC 30 Rockefeller Plaza New York, New York 10112 CUSTODIAN State Street Bank and Trust Company 225 Franklin Street Boston, Massachusetts 02110 TRANSFER AGENT AND DIVIDEND DISBURSING AGENT Boston Financial Data Services, Inc. P.O. Box 9363 Boston, Massachusetts 02205-9363 Telephone: (800) 986-3455 INDEPENDENT PUBLIC ACCOUNTANTS Anchin, Block & Anchin LLP 1375 Broadway New York, New York 10018 http://www.anchin.com LEGAL COUNSEL Stroock & Stroock & Lavan LLP 180 Maiden Lane New York, New York 10038-4982 http://www.stroock.com LAZARDFUNDS 30 Rockefeller Plaza New York, New York 10112 Telephone (800) 823-6300 http://www.lazardnet.com This report is for the information of the shareholders of The Lazard Funds, Inc. Its use in connection with any offering of the Fund's shares is authorized only in the case of a concurrent or prior delivery of the Fund's current prospectus. LAZARDFunds SEMI-ANNUAL REPORT JUNE 30, 2001 ================================================================================ THE LAZARD FUNDS, INC. -------------------------------------------------------------------------------- BOARD OF DIRECTORS ================== JOHN J. BURKE RETIRED; FORMER VICE CHAIRMAN AND DIRECTOR, MONTANA POWER COMPANY KENNETH S. DAVIDSON PRESIDENT, DAVIDSON CAPITAL MANAGEMENT CORPORATION NORMAN EIG VICE CHAIRMAN AND MANAGING DIRECTOR, LAZARD FRERES & CO. LLC CARL FRISCHLING SENIOR PARTNER, KRAMER LEVIN NAFTALIS & FRANKEL LLP HERBERT W. GULLQUIST VICE CHAIRMAN AND MANAGING DIRECTOR, LAZARD FRERES & CO. LLC; CHIEF INVESTMENT OFFICER, LAZARD ASSET MANAGEMENT WILLIAM KATZ PRESIDENT AND CHIEF EXECUTIVE OFFICER, BBDO NEW YORK LESTER Z. LIEBERMAN PRIVATE INVESTOR RICHARD REISS, JR. MANAGING PARTNER, GEORGICA ADVISORS LLC JOHN RUTLEDGE PRESIDENT, RUTLEDGE CAPITAL OFFICERS ======== NORMAN EIG CHAIRMAN OF THE BOARD HERBERT W. GULLQUIST PRESIDENT DAVID M. GOLDENBERG VICE PRESIDENT AND SECRETARY BERNARD J. GRZELAK TREASURER NATHAN A. PAUL ASSISTANT SECRETARY STEPHEN ST. CLAIR ASSISTANT TREASURER ================================================================================ THE LAZARD FUNDS, INC. -------------------------------------------------------------------------------- TABLE OF CONTENTS PAGE Investment Overviews ................................... 2 Performance Table ...................................... 11 Portfolios of Investments Lazard Equity Portfolio .............................. 14 Lazard Mid Cap Portfolio ............................. 16 Lazard Small Cap Portfolio ........................... 18 Lazard Global Equity Portfolio ....................... 21 Lazard International Equity Portfolio ................ 23 Lazard International Small Cap Portfolio ............. 25 Lazard Emerging Markets Portfolio .................... 27 Lazard International Equity Select Portfolio ......... 29 Lazard Bond Portfolio ................................ 30 Lazard High Yield Portfolio .......................... 35 Lazard International Fixed-Income Portfolio .......... 39 Lazard Strategic Yield Portfolio ..................... 49 Lazard Mortgage Portfolio ............................ 61 Notes to Portfolios of Investments ..................... 62 Statements of Assets and Liabilities ............................... 66 Operations ........................................... 68 Changes in Net Assets ................................ 70 Financial Highlights ................................... 77 Notes to Financial Highlights .......................... 90 Notes to Financial Statements .......................... 91 THE VIEWS OF THE FUND'S MANAGEMENT AND THE PORTFOLIO HOLDINGS DESCRIBED IN THIS DOCUMENT ARE AS OF JUNE 30, 2001; THESE VIEWS AND PORTFOLIO HOLDINGS MAY HAVE CHANGED SUBSEQUENT TO THIS DATE. INFORMATION PROVIDED IN THIS DOCUMENT SHOULD NOT BE CONSIDERED A RECOMMENDATION TO PURCHASE OR SELL SECURITIES. ================================================================================ THE LAZARD FUNDS, INC. INVESTMENT OVERVIEWS -------------------------------------------------------------------------------- LAZARD EQUITY PORTFOLIO For the six months ended June 30, 2001, the Portfolio's Institutional Shares posted a total return of 1.50% and Open Shares returned 1.38%, each beating the (6.70)% return of the S&P 500(R) Index during the same period. The market began 2001 with a rally during January. However, negative economic news, a series of profit warnings and the California energy crisis soon combined to reverse this rally. As investors' hopes for a market rebound later in the year waned, even the Federal Reserve's interest rate cuts proved incapable of stemming the on-going volatility and sector rotation. Corporate earnings growth slowed for technology companies in particular, while sectors that are historically more insulated from the economy, such as pharmaceuticals and utilities, did manage to hold up through much of the first quarter before finally succumbing to the negative investment atmosphere. By the early part of the second quarter, U.S. stocks, particularly technology companies, managed a rally spurred by the Federal Reserve's on-going and unprecedented number of interest rate cuts. However, concern in the market remains that the current downturn is a result of a flood of investment during the earlier technology boom. If this proves true, the economy is unlikely to respond to the Federal Reserve's monetary stimulus. This concern caused stocks to reverse their second rally of the year and resume their downward drift during May and June. The Portfolio's strong stock selection enabled it to outperform the broader market as depicted by the S&P 500 through much of the first half of 2001. For example, while the technology sector proved itself quite volatile during the first half of the year, many of the Portfolio's holdings, including IBM and Compaq, actually managed gains in this environment. IBM rose because of its strong global services business, while Compaq rose due to its strong server and storage business. In the media sector, cyclical companies were more affected by the decline in advertising. Therefore, we initiated positions in more diversified global franchises such as Viacom and News Corp., as we believe that Viacom's efficient cross selling initiatives and News Corp.'s assets position them both as excellent long-term investments. Other media holdings, such as AOL Time Warner, generated strong gains as a benefit of diverse revenue sources, strong free cash flows and a stable subscription business. The Portfolio's healthcare holdings detracted from its performance as they corrected from an overly strong fourth quarter of 2000. In response, we restructured many of the Portfolio's healthcare holdings, taking profits in several names and reallocating to companies such as Elan and Pharmacia, which have demonstrated robust product pipelines. The return to economic recovery still appears far away, as corporate earnings remain cloudy and investors evaluate the impact of the global economic slowdown. Lazard, however, will adhere to its disciplined investment process of focusing on individual company fundamentals, as we believe that our relative value discipline will enable the Portfolio to best weather the market's fluctuations. LAZARD MID CAP PORTFOLIO For the six months ended June 30, 2001, the Portfolio's Institutional Shares posted a total return of 9.15% and Open Shares returned 9.03%, each beating the (1.96)% return of the Russell Midcap(R) Index during the same period. U.S. mid cap stocks rebounded in January because of investor euphoria over the first of six interest rate cuts implemented by the Federal Reserve in the first half of the year. However, the enthusiasm faded later in the month, as a series of companies reporting disappointing earnings dashed hopes for an economic rebound in the second half of the year. Technology stocks were particularly hard hit, as the earnings slowdown has been especially apparent in this sector. Companies in more traditional sectors, such as the consumer sector, actually managed gains for much of the first quarter, before succumbing to the negative investor sentiment in the final weeks. Mid cap stocks performed well in the down market because of their inexpensive valuations. Their good performance continued into the second quarter and mid cap stocks continued to outperform larger stocks. A surprise intra-meeting interest rate cut by the Federal Reserve, one of three during the second quarter, triggered an April rally in the technology sector. However, concern that the current economic downturn is a result of a flood of investment during the earlier technology boom, and that the market is unlikely to respond to the Federal 2 ================================================================================ THE LAZARD FUNDS, INC. INVESTMENT OVERVIEWS (CONTINUED) -------------------------------------------------------------------------------- Reserve's monetary stimulus, caused mid cap stock performance to remain essentially flat during May and June. Consumer holdings have performed particularly well year-to-date, as consumer spending remains one of the bright spots in the U.S. economy. The Portfolio benefited from its retail and entertainment holdings, including Blockbuster and USA Networks. Early in the year, the Portfolio benefited from its biotechnology holdings such as Biogen, which maintains a strong and diverse product pipeline and higher returns on equity. Later performance continued to be driven by the healthcare sector, with specialty pharmaceutical manufacturer King Pharmaceuticals, for example, rallying on reports that its hypertension drug was displaying strong growth in sales and market share and MedImmune rising because of increased visibility of its new drug pipeline, which includes positive data from trials of its new drug to treat psoriasis. The energy sector also proved beneficial to the Portfolio's performance year-to-date. As energy stocks declined during the first quarter, we took the opportunity to initiate a position in Constellation Energy Group, as the stock traded on a discount to other electricity generators, based on earnings, book value and cash flow. Maxtor, the leader in hard disk storage, initially proved beneficial as it rose in tandem with the technology rallies, but was later impacted by the slowdown in PC sales, adversely affecting the Portfolio's year-to-date performance. We remain concerned about the continuing swings in market sentiment, but believe that the Portfolio is well positioned for the long term. Lazard's relative value style seeks investments in well-managed businesses with strong cash flow and modest debt levels. The Portfolio, therefore, seeks positions with more consistent earnings streams and lower valuations, which should help it to better weather these fluctuations. We will, therefore, continue to adhere to our disciplined investment process of maintaining focus on individual company fundamentals rather than on the dramatic market sentiment swings. LAZARD SMALL CAP PORTFOLIO For the six months ended June 30, 2001, the Portfolio's Institutional Shares posted a total return of 9.35% and Open Shares returned 9.26%, each beating the 6.94% return of the Russell 2000(R) Index during the same period. The year-to-date performance for the Portfolio was affected significantly by the market's continued volatility, which began last year. While the market initially rebounded in January because of investor enthusiasm about the first of the Federal Reserve's interest rate cuts, that enthusiasm ebbed quickly as a series of companies began to report disappointing earnings. The hardest hit sector was technology, as its earnings slowdown was particularly apparent. Many companies in other sectors actually held up quite well before finally succumbing to negative investor sentiment in the final weeks of the first quarter. In this environment, U.S. small caps still managed to outperform larger companies as their lower valuations provided additional support during the overall decline. By early in the second quarter, U.S. small caps had significantly recovered from their first quarter decline to generate fairly strong gains and continued to outperform the larger cap stocks. Investor sentiment finally began to turn positive in response to three more interest rate cuts implemented by the Federal Reserve during the second quarter. However, concern still exists that the current economic downturn is a result of a flood of investment during the earlier technology boom and that the market is unlikely to respond to the Federal Reserve's monetary stimulus. The Portfolio's strong stock selection in several sectors helped it to outperform its benchmark, the Russell 2000 Index. In healthcare, companies such as medical products supplier Invacare, proved attractive to investors who sought out defensive names with which to ride out the volatility. The consumer sector has also proven itself to be particularly resilient this year, as consumer spending remains one of the few strong areas of the economy. Several of the Portfolio's consumer discretionary holdings were opportunistically trimmed, to take advantage of this sector's upswing. Other consumer sector companies, such as Harman International, are positioning themselves to expand further once the economy recovers. The Portfolio's technology holdings have proved disappointing in the first half of the year. Market sentiment regarding technology companies has declined significantly. However, we believe that our technology holdings, such as hard drive producer Maxtor, are poised to benefit from an eventual upturn in PC demand. 3 ================================================================================ THE LAZARD FUNDS, INC. INVESTMENT OVERVIEWS (CONTINUED) -------------------------------------------------------------------------------- We remain aware of and concerned about the extreme swings in market sentiment, but believe that the Portfolio has been composed of well-managed businesses with strong cash flows and modest debt levels. In addition, the Portfolio's holdings have generally demonstrated more consistent earnings streams and lower valuations than those in its benchmark. Therefore, we will continue to adhere to our investment process of maintaining focus on individual company fundamentals so that the Portfolio may continue to benefit from Lazard's disciplined investment process. LAZARD GLOBAL EQUITY PORTFOLIO For the six months ended June 30, 2001, the Portfolio's Institutional Shares posted a total return of (8.14)% and Open Shares returned (8.29)%, each beating the (10.55)% return of the MSCI(R) World(R) Index during the same period. The year began with stocks in the United States falling, largely because of negative economic news and a series of profit warnings from American companies. European markets also dropped, primarily because of concerns that the U.S. economic slowdown would impact European companies. The Bank of Japan proactively cut interest rates and announced its intent to deal more aggressively with its much publicized bank problems. These measures appeared to help Japanese stocks, as they fell slightly less than their European counterparts for the first quarter. By April, central banks around the world followed suit, as the Bank of England, the European Central Bank and the Federal Reserve all cut interest rates. Investors were heartened, as stocks, which have historically generated robust returns after monetary easing, rebounded. The new Japanese Prime Minister's intent to accelerate financial reforms further drove Japanese stocks higher by early May. Many view the proposed reforms to be long-term positive initiatives, but concerns remain that these painful steps could push Japan's economy further into recession in the short-term. The Portfolio was buffered as many companies responded to the economic volatility by restructuring operations and cutting costs. In the financial sector, for example, France's largest bank, BNP Paribas, stopped lending to small businesses because the margins were no longer sufficient to cover the underlying risk. Many of these initiatives have already yielded favorable results. For example, increases in oil production and the implementation of cost-cutting measures enabled TotalFinaElf to raise its dividend by 40 percent and announce record profits for 2000. NTT DoCoMo, Japan's leading mobile phone company, also announced that it expected to beat earnings forecasts for the fiscal year. In the media sector, AOL Time Warner generated strong gains on the announcement of strong earnings from its diverse revenue sources, strong free cash flow and stable subscription business. The impact of recently announced German tax reforms also became apparent during the first half of 2001. Pan-European financial institutions, such as Allianz AG and Bayerische Hypo-und Vereinsbank, are exploring ways to swap latent shareholdings in an attempt to eliminate unproductive balance sheet assets and further strengthen their operations. Lazard believes that Germany's recent pension and tax reform is likely to have a far-reaching and long-lasting impact on European capital markets. The deregulation and tax reform in the United States that set the stage for the robust equity returns witnessed throughout the 1990s are now apparent in Europe and, to a lesser extent, in Japan. We will, therefore, adhere to our investment process of maintaining focus on individual company fundamentals, as global firms seek to evolve into stronger companies with better fundamentals. LAZARD INTERNATIONAL EQUITY PORTFOLIO For the six months ended June 30, 2001, the Portfolio's Institutional Shares posted a total return of (13.82)% and Open Shares returned (13.94)%, each beating the (14.61)% return of the MSCI EAFE(R) Index during the same period. International equity markets fell during the first quarter of 2001 largely because of concerns that the U.S. economic slowdown would negatively impact international companies, and because of widespread perception that international central banks were not dealing with interest rates aggressively enough to buoy those economies. In response, the Bank of Japan, the Bank of England, the European Central Bank and the Federal Reserve all cut interest rates during the first half of 2001, thereby triggering rallies across the globe, particularly in the beaten down technology and telecommunications sectors. Japanese stocks, despite negative media coverage, 4 ================================================================================ THE LAZARD FUNDS, INC. INVESTMENT OVERVIEWS (CONTINUED) -------------------------------------------------------------------------------- had initially fallen less than their European counterparts, and the new Japanese Prime Minister's announced intent to accelerate financial reforms further added to the optimism, driving Japanese stocks dramatically higher during the early May rally. The rally faded later in the second quarter, however, as corporate earnings continued to be weak and expectations for economic growth in Europe and Japan were revised down. On a more positive note, the impact of recently announced German tax reforms began to become apparent during the first half of 2001, as pan-European financial institutions such as Allianz AG and Bayerische Hypo-und Vereinsbank began to explore ways to swap latent shareholdings in an attempt to eliminate unproductive balance sheet assets and strengthen their operations. In response to the changing economic environment and new tax and retirement reforms, many companies in all sectors and markets have responded by implementing a number of restructuring and cost-cutting moves that are designed to return the companies to or to maintain current profitability. For example, BNP Paribas, France's largest bank, stopped lending to small businesses, as it deemed the margins no longer sufficient to cover the underlying risk. Similarly, ING Groep is enhancing its balance sheet through the disposal of assets and cost-cutting measures, such as selling its U.S. securities business to ABN AMRO and integrating its Barings unit into its European operations. ABN AMRO is not only buying businesses to bolster its competitive position, but it is also selling its non-core operations. The recent disposal of European American Bank, for example, added credibility to management's commitment to its strategy of restructuring the bank and has already yielded many positive results. Several other reorganization initiatives that were launched earlier have already yielded favorable results. For example, increases in oil production and cost savings allowed TotalFinaElf to raise its dividend by 40 percent and to announce record profits for 2000. Similarly, NTT DoCoMo, Japan's leading mobile phone company, announced that it expected to beat earnings forecasts for the fiscal year, with additional expansion planned into the i-mode mobile phone network in Europe and the United States within the year. We believe that Germany's recent pension and tax reform is likely to continue to have a far-reaching and long-lasting impact on European capital markets. The deregulation and tax reform in the United States that set the stage for the robust equity returns witnessed throughout the 1990s are now apparent in Europe and, to a lesser extent, in Japan. Lazard believes that these reforms should increase the return on capital that companies are able to generate. Therefore, we will continue to adhere to our relative value style of investing that focuses on selecting financially productive companies on the basis of their individual fundamentals, rather than on popular market sentiment. LAZARD INTERNATIONAL SMALL CAP PORTFOLIO For the six months ended June 30, 2001, the Portfolio's Institutional Shares posted a total return of (2.86)% and Open Shares returned (3.11)%, each beating the (3.28)% return of the MSCI EAFE Small Cap(R) Index during the same period. International equity markets, in general, did not perform well during the first quarter of 2001. However, by April they had rallied to end four consecutive quarters of decline. The EAFE small cap asset class defended itself against the overall decline better than large cap stocks and managed to outperform the large cap asset class for the entire first half of the year. Lazard believes that a valuation gap still exists between large and small cap stocks and that small caps are likely to continue to outperform large cap stocks for some time. The Portfolio's positive performance during the second quarter was largely attributed to strong stock selection in the United Kingdom and Sweden, and was fueled by investors heartened by interest rate cuts by the Bank of England, the European Central Bank and the Federal Reserve, as well as by positive reaction to new tax legislation. By sector, strong contributions to the Portfolio's performance came from our consumer staples and consumer discretionary holdings. Singapore food manufacturer Want Want, for example, was the Portfolio's top performer for the first quarter, as it reported better-than-expected sales results for 2000. Swedish Match, maker of consumer products, announced both strong earnings for 2000 and a highly positive outlook for the future. Kidde, the U.K.-based supplier of fire and safety equipment, was another big contributor to the Portfolio's performance as it stated that its outlook for 2001 remained 5 ================================================================================ THE LAZARD FUNDS, INC. INVESTMENT OVERVIEWS (CONTINUED) -------------------------------------------------------------------------------- encouraging despite the global economic downturn. Another U.K. holding, engineering company FKI, also performed well, reporting gains for May despite the economic downturn. While almost no sector remained unscathed by the markets' overall volatility, companies like Japanese mushroom grower, Hokuto, proved that exceptional stock selections could still be found in all sectors. Hokuto was among the Portfolio's top performers for the first half of the year because of its introduction of a new mushroom that was well received by the market, despite overall price pressure on consumer food products. The United States has already seen a sharp decline in economic growth; Japan continues to remain in its decade long slump; and, while Europe has remained relatively resilient to the downturn, concern is growing that the effects of the U.S. economic downturn will soon undermine European stability. However, we believe that our relative value style helps us to uncover financially productive companies that are more resilient to swings in market sentiment. We will, therefore, continue to adhere to our disciplined fundamental approach. LAZARD EMERGING MARKETS PORTFOLIO For the six months ended June 30, 2001, the Portfolio's Institutional Shares posted a total return of 0.40% and Open Shares returned 0.27%, each beating the (1.64)% return of the MSCI EMF(R) Index during the same period. The year began strongly for emerging markets equities, as they benefited from the aggressive easing of monetary policy by the Federal Reserve. However, increased fears of slowing growth, and global weakness in the technology and telecommunications sectors, led to a drop of about 5 percent for the MSCI EMF Index for the first quarter. The Asian markets performed the best, rising around 1.4 percent, while Latin American equities fell approximately 3 percent. By far, the weakest performing region was that of Europe and the Middle East, where shares finished down almost 22 percent. By the second quarter, emerging markets recovered sufficiently to rise approximately 4 percent, while international (developed) markets fell 1 percent. Eastern Europe was the strongest emerging markets region for the second quarter; however, Latin American markets also performed reasonably well. By region, Asia was the second quarter's laggard, as it was adversely affected by the continuing weakness in technology, which represents a large portion of the South Korean and Taiwanese markets. The slow movement towards much needed voluntary restructuring in Asia also contributed to its poor performance. The first half of the year was dominated by national crises from all regions. Latin American equity markets were unable to escape the reverberations of Argentina's serious economic concerns, government reshuffling and dramatic volatility. The appointment of former finance minister Domingo Cavallo as economy minister, in late March, helped to steady Argentina's stock market. However, the effect Cavallo's appointment had on Brazil's economy, coupled with the increasing competition within the Brazilian telecommunications industry, resulted in the Brazilian market falling by more than 10 percent during the first quarter alone. Conversely, Mexican equities rose by almost 4 percent during the first quarter and 20 percent during the second quarter. Mexico's performance was greatly helped by Citigroup's announcement of its $12.5 billion acquisition of Mexico's leading financial group, Banacci, in May, and the positive tone of the economy that is being demonstrated in the strength of the peso. Weak regional performance from Europe and the Middle East also resulted from internal crises. An argument between the Turkish President and Prime Minister contributed to huge capital outflows that led to a devaluation of the Turkish lira in February. Although a former World Bank executive was appointed to restore confidence with a new program, the lira fell further as investors were unimpressed by the government's lethargic enactment of important legislation. In Israel, equities finished more than 30 percent lower, as software shares were hammered and amid concerns over the election of the new Likud government. Subsequently, the aversion of the economic crisis in Turkey propelled Turkish stock prices to rise by more than 19 percent in the second quarter, thereby making Turkey one of the best performing markets year-to-date. Israel did not fare as well, as the on-going violence continues to badly affect the shekel, slow economic growth and swell Israel's budget deficits. In addition, foreign investment has plunged more than 50 percent this year as investors have pulled out of the Tel Aviv Stock Exchange. 6 ================================================================================ THE LAZARD FUNDS, INC. INVESTMENT OVERVIEWS (CONTINUED) -------------------------------------------------------------------------------- We remain concerned about the continuing swings in market sentiment, but believe that the Portfolio is well positioned for the long term. We believe that our relative value style leads to investments in well-managed businesses with strong cash flow and modest debt levels, enabling the Portfolio to maintain positions with more consistent earnings streams and lower valuations, which should help it to better weather these fluctuations. As well, we believe the Portfolio will continue to benefit from our disciplined fundamental approach. LAZARD BOND PORTFOLIO For the six months ended June 30, 2001, the Portfolio's Institutional Shares posted a total return of 3.61% and Open Shares returned 3.51%, each trailing the 4.08% return of the Lehman Intermediate Government/Corporate Bond(R) Index ("LIGCB") during the same period. The Federal Reserve began an aggressive program of monetary policy easing in 2001, cutting interest rates a total of 6 times for a total reduction of 275 basis points. This significantly altered the U.S. government yield curve and reshaped investors' view of risk. As a result, non-government bonds, including corporate bonds, mortgages and asset-backed securities, enjoyed strong performance relative to government alternatives. The LIGCB Index rose by four percent during the first half of the year, with particular strength in the first quarter when it rose more than three percent. All sectors of the bond market participated, with returns on corporates, mortgages and asset-backed securities all exceeding Treasury returns. High yield bonds were strong during the first quarter, but suffered from underlying weakness in the telecommunications and technology sectors in the second quarter and fell off sharply. Overall, the first half of 2001 for high yield bonds was characterized by alternating optimism and pessimism, which resulted from a significant level of volatility in the market. Investment grade corporate bonds and mortgages also performed well during the first half of the year, although mortgage performance was dampened somewhat as falling interest rates caused prepayment risk to increase. In spite of this, mortgage bonds posted solid overall performance. While the Treasury bond market performance was unspectacular in the second quarter, investment grade non-government assets enjoyed a strong environment despite limited weakness in June. The Portfolio trailed its benchmark slightly for the first half of the year, as an allocation to the U.S. high yield corporate market suffered from weaknesses in the telecommunications sector and concern over earnings disappointments. This outlook reduced the high yield market's performance more than 2 percent behind that of Treasuries for the second quarter. In addition, the Portfolio was underweight in investment grade corporates; however, we increased the Portfolio's allocation significantly to capture the positive impact of tightening corporate yield spreads. Allocations to both asset-backed securities and commercial mortgages also added to the Portfolio's performance for the first half of the year. Lazard remains optimistic regarding the prospects for bonds, as we believe that economic news will remain weak and that the Federal Reserve will probably continue to ease interest rates. This should continue to provide benefits to credit markets. Yet, as interest rates reach absolute low levels, return opportunities diminish and risk increases for bond portfolios, we will look to moderate risk exposures as necessary. LAZARD HIGH YIELD PORTFOLIO For the six months ended June 30, 2001, the Portfolio's Institutional Shares posted a total return of 2.89% and Open Shares returned 2.89%, each trailing the 3.38% return of the Merrill Lynch High Yield Master II(R) Index during the same period. The first half of 2001 has alternated between extreme optimism and extreme pessimism, as investors focused on the promising nature of the Federal Reserve's interest rate cuts or on the bleak corporate profit outlook. These investor mood swings have led to heightened volatility in the U.S. high yield market. In spite of this volatility, the U.S. high yield market remains ahead almost 3.4 percent for the year. The U.S. high yield market began the year strongly because of the Federal Reserve's first 50-basis point interest rate cut in January. In response, high yield bonds rallied to post returns of more than six percent for the month, making it the strongest single month performance for the U.S. corporate high yield 7 ================================================================================ THE LAZARD FUNDS, INC. INVESTMENT OVERVIEWS (CONTINUED) -------------------------------------------------------------------------------- bond market since February 1991. Investors returned to the high yield market en masse as mutual fund flows surged. Smaller issuers outperformed larger issuers, and investors looked with favor on B-rated issuers, with which the Portfolio maintains overweight positions. The market continued its strong performance through mid-March. The Federal Reserve cut interest rates twice more by 50-basis points each time, bringing interest rates to five percent. While these cuts prompted the yield curve, which had been inverted through most of 2000, to again become positively sloped, the cuts proved insufficient to sustain the market's initial positive performance. By the end of March, the market had again weakened as the B-rated segment returned much of its earlier gains and the flows from mutual fund receded. The U.S. high yield market then dropped by 2.3 percent during the second quarter because of disappointing corporate earnings announcements and persistent weakness in the telecommunications sector. Telecommunications was, in fact, one of the worst performing high yield sectors for the first half of the year; our cautious approach to this sector provided a positive influence on the Portfolio's performance. The Portfolio trailed the market slightly for the second quarter, as the negative impact of an overweight position to the weaker B-rated segment was largely offset by overweight positions in the cable and broadcasting sectors. Lazard believes that the Federal Reserve will continue to ease interest rates, thereby enhancing the immediate future of the bond markets by improving liquidity. We also believe that the earnings picture in the United States will eventually gain a more stable footing. This would lead to improved performance in the high yield market during the second half of 2001. Lazard seeks to construct the Portfolio with higher quality companies that are designed to perform well under volatile circumstances and we believe that the Portfolio will continue to benefit by maintaining our disciplined fundamental approach. LAZARD INTERNATIONAL FIXED-INCOME PORTFOLIO For the six months ended June 30, 2001, the Portfolio's Institutional Shares posted a total return of (6.69)% and Open Shares returned (6.74)%, each beating the (6.78)% return of the Salomon World Government Bond Index Ex-US(R) during the same period. Most developed market currencies weakened against the U.S. dollar during the first half of the year. Global government bond markets rallied on signs of slowing economic growth in the first quarter, but later gave ground in the second quarter. Euro government bond market performance was disappointing, despite some late hope that the European Central Bank would reduce interest rates. Meanwhile, the Bank of England continued to indicate the preference for tighter policies and the U.K. Gilt market posted a weak second quarter. While bond markets were disappointing overall, non-government assets, including corporates and mortgages, performed well relative to government bonds for the first half of the year. Non-government assets in Europe surged early in the year, with risk premiums declining in most asset classes, particularly in higher rated segments such as asset-backed securities and corporate issues. Despite a general global weakness in the telecommunications sector, investment grade corporate telecommunications in Europe performed well. The Portfolio's overweight of these issuers provided a boost to relative performance in the second quarter. The European high yield market began the year strongly, then succumbed to pressures from telecommunications and technology and faded in the second quarter, dropping more than 7 percent in June alone. Although an allocation to high yield negatively impacted performance, active management allowed the Portfolio's European high yield positions to significantly better the performance of the broader European high yield market. The primary drivers were the Portfolio's relatively defensive orientation, an underweight of the high yield telecommunications sector and an emphasis on higher quality industrial companies. Although the local currency emerging market asset class suffered a rather weak first quarter, it recovered some ground with solid performance during the balance of the first half of the year. Strong country selection and the Portfolio's higher level of diversification both more than offset the first quarter's weakness and provided a significant benefit to first half performance for the sector and the Portfolio. Overall, the Portfolio outperformed its benchmark Index; underperforming it in the first quarter and outperforming it in the second quarter. Although the 8 ================================================================================ THE LAZARD FUNDS, INC. INVESTMENT OVERVIEWS (CONTINUED) -------------------------------------------------------------------------------- strong U.S. dollar caused overall performance in international bond strategies to be disappointing, impressive active management in the emerging market debt sector augmented a solid period for high-grade non-government assets, such as corporates and asset-backed securities. Yield spreads in the euro-zone, the United Kingdom and other European non-government markets generally declined and the Portfolio's overweight of these sectors provided a positive contribution to relative performance. LAZARD STRATEGIC YIELD PORTFOLIO For the six months ended June 30, 2001, the Portfolio's Institutional Shares posted a total return of 3.55% and Open Shares returned 3.27%, each beating the 2.32% return of the One Month LIBOR USD Fixed Index during the same period. Interest rate cuts by the Federal Reserve and strong showings by the technology and telecommunications sectors combined to spur a rally in global high yield bond markets for the beginning of 2001. Both U.S. and European high yield bonds rallied as investors returned with overwhelming force, mutual fund flows surged into the market and investors looked with favor on B-rated issuers, with which the Portfolio maintains overweight positions. As the year progressed, however, weakness in the telecommunications and technology sectors drained the strength from the global high yield market and mutual fund flows receded. In addition, U.S. and European high yield corporate bonds were hampered by continuing volatility in underlying equity markets and investors' general uneasiness with the corporate earnings outlook. While performance in global corporate high yield markets proved disappointing in the first half of 2001, the emerging markets local currency debt sector posted a strong second quarter subsequent to its weak start for the year. The Portfolio's emerging markets local currency debt allocation posted strong relative performance throughout the first half of the year, because of a high level of diversification and strong active management. Key performers included the Portfolio's overweight positions in Poland, which benefited from falling interest rates and a strong currency, and Hungary, where the currency also rallied. Active management of the Portfolio's position in Turkey also was a strong contributor. The position was limited to overnight exposure to minimize risks, and exposure was eliminated prior to the most difficult periods. These positive contributors more than offset the impact of negative factors, which included lack of exposure to the Philippines and Lebanon, which performed well, and an overweight position in Brazil, which suffered through a weak first quarter. Lazard's outlook is positive for emerging markets, as yields remain high and the Portfolio's current orientation is designed to minimize risks from individual crises. We also expect that the impact of easing monetary policy will continue to filter through the global economy, improving the environment for high yield corporate bonds. LAZARD MORTGAGE PORTFOLIO For the six months ended June 30, 2001, the Portfolio's Institutional Shares posted a total return of 3.21% trailing the 3.78% return of the Lehman Fixed-Rate MBS(R) Index during the same period. The U.S. mortgage sector underperformed Treasury bonds for the first quarter of 2001, thereby starting the year with a disappointing performance. Falling interest rates caused investors to become more concerned with mortgage prepayments, and this led to widening yield spreads. The market recovered in April, however, as lower interest rate volatility and a general rally in non-government sectors drove the mortgage sector to produce its best relative performance, versus Treasuries, during the first half of 2001. May also proved a strong month for mortgages, and the combined positive results of April and May were more than sufficient to offset the weak first quarter and the sector's less-than-stellar June finish. GNMA mortgage pass-throughs outperformed conventional pass-throughs during the first half of the year, and 30-year mortgage pass-throughs performed better than 15-year pass-throughs, although by a less impressive margin. Asset-backed securities and commercial mortgages also outperformed Treasuries during the first half of 2001. The Lehman Fixed-Rate MBS Index returned 3.78 percent during the first half of 2001, outpacing comparable Treasury returns by a solid margin. However, the Portfolio's underweight position in GNMA mortgages, which performed well, and its higher sensitivity to increasing yield spreads and interest rate fluctuations caused the Portfolio to under- 9 ================================================================================ THE LAZARD FUNDS, INC. INVESTMENT OVERVIEWS (CONCLUDED) -------------------------------------------------------------------------------- perform the index. On the positive side, the Portfolio's tactical positions in commercial mortgages and asset-backed securities outperformed mortgages in the first quarter, and the overall defensive orientation during the mortgage market's weak period of February and March helped mitigate the Portfolio's relative performance year-to-date. The relatively stable range of 10-year Treasury yields during 2001 has provided stability to the mortgage market, and Lazard believes that the prevailing low level of mortgage rates has resulted in an attractive level of risk compensation to mortgage investors. NOTES TO INVESTMENT OVERVIEWS: All returns are for the period ended June 30, 2001. The performance for the relevant indices are for the comparable period. Portfolio returns are net of fees and assume reinvestment of all dividends and distributions, if any. Certain expenses of a Portfolio have been waived and/or reimbursed by the Fund's Investment Manager and/or Administrator; without such waiver/reimbursement of expenses, the Portfolio's total return would have been lower. Past performance is not indicative, nor a guarantee, of future results. 10 -------------------------------------------------------------------------------- THE LAZARD FUNDS, INC. PERFORMANCE TABLE -------------------------------------------------------------------------------- THE PERFORMANCE DATA CONTAINED IN THE PERFORMANCE TABLE IS NOT AUTHORIZED FOR DISTRIBUTION TO PROSPECTIVE INVESTORS IN A PORTFOLIO UNLESS PRECEDED OR ACCOMPANIED BY AN EFFECTIVE PROSPECTUS.
AVERAGE ANNUAL TOTAL RETURNS FOR PERIODS ENDED JUNE 30, 2001 -------------------------------------------------------------- INSTITUTIONAL SHARES -------------------------------------------------------------- ONE THREE FIVE TEN SINCE YEAR YEAR YEAR YEAR INCEPTION* -------------------------------------------------------------- Lazard Equity Portfolio 2.31% 2.20% 10.56% 14.07% 12.40% S&P 500(R) Index** (14.83)% 3.89% 14.47% 15.10% 13.59% S&P/BARRA Value(R) Index** 7.92% 6.07% 14.34% 15.18% 13.27% Russell 1000(R) Value Index** 10.33% 5.35% 14.94% 15.78% 13.63% Lazard Mid Cap Portfolio 27.28% 10.82% -- -- 11.44% Russell Midcap(R) Index** 0.96% 8.17% -- -- 10.16% Russell Midcap Value Index** 23.92% 6.43% -- -- 8.86% Lazard Small Cap Portfolio 21.74% 3.65% 9.99% -- 14.69% Russell 2000(R) Index** 0.65% 5.31% 9.62% -- 12.77% Russell 2000 Value Index** 30.87% 6.92% 13.45% -- 15.80% Lazard Global Equity Portfolio (14.71)% (1.41)% 7.51% -- 7.83% MSCI(R) World(R) Index** (20.30)% 1.13% 8.16% -- 8.63% Lazard International Equity Portfolio (19.27)% (2.21)% 5.79% -- 7.74% MSCI EAFE(R) Index** (23.60)% (1.24)% 2.89% -- 5.55% Lazard International Small Cap Portfolio (8.22)% 0.24% 5.99% -- 5.88% MSCI EAFE Small Cap(R) Index** (16.74)% (1.44)% (5.57)% -- (0.75)% Lazard Emerging Markets Portfolio (22.68)% (2.03)% (4.82)% -- (1.94)% MSCI EMF(R) Index** (25.82)% 1.48% (6.40)% -- (3.95)% Lazard Bond Portfolio 8.80% 4.39% 5.93% -- 6.05% Lehman Intermediate Gov't/Corp Bond(R) Index** 11.04% 6.43% 7.01% -- 6.94% Lazard High Yield Portfolio (9.68)% (5.29)% -- -- (2.23)% Merrill Lynch High Yield Master II(R) Index** (0.92)% (0.34)% -- -- 1.00% Lazard International Fixed-Income Portfolio (7.92)% (1.33)% (0.43)% -- 4.18% Salomon World Government Bond Index Ex-US(R)**+ (7.43)% (0.20)% 0.49% -- 5.40% Lazard Strategic Yield Portfolio 3.37% 2.26% 4.66% -- 6.45% One Month LIBOR USD Fixed Index** 5.67% 5.59% 5.60% -- 5.07%
NOTES TO PERFORMANCE TABLE: * Performance is measured for Lazard Equity Portfolio from: June 1, 1987--Institutional, February 5, 1997--Open; Lazard Mid Cap Portfolio from: November 4, 1997--Institutional, November 4, 1997--Open; Lazard Small Cap Portfolio from: October 30, 1991--Institutional, January 30, 1997--Open; Lazard Global Equity Portfolio from: January 4, 1996--Institutional, January 30, 1997--Open; Lazard International Equity Portfolio from: October 29, 1991--Institutional, January 23, 1997--Open; Lazard International Small Cap Portfolio from: December 1, 1993--Institutional, February 13, 1997--Open; Lazard Emerging Markets Portfolio from: July 15, 1994--Institutional, January 8, 1997--Open; Lazard Bond Portfolio from: November 12, 1991--Institutional, March 5, 1997--Open; Lazard High Yield Portfolio from: January 2, 1998--Institutional, February 24, 1998--Open; Lazard International Fixed-Income Portfolio from: November 8, 1991--Institutional, January 8, 1997--Open; Lazard Strategic Yield Portfolio from: October 1, 1991--Institutional, January 23, 1997--Open; Lazard Mortgage Portfolio from: December 29, 2000--Institutional. The performance for the relevant indices are for the comparable period. Portfolio returns are net of fees and assume reinvestment of all dividends and distributions, if any. Certain expenses of the Portfolios have been waived and/or reimbursed by the Fund's Investment Manager and/or Administrator; without such waiver/reimbursement of expenses, the Portfolios' total returns would have been lower. Past performance is not indicative, nor a guarantee, of future results; the investment return and principal value of each Portfolio will fluctuate, so that an investor's shares in a Portfolio, when redeemed, may be worth more or less than their original cost. Within the longer periods illustrated there may have been short-term fluctuations, counter to the overall trend of investment results, and no single period of any length may be taken as typical of what may be expected in future periods. + Effective January 1, 1993, the Portfolio is measured by the index "excluding U.S." Performance of the index "Since Inception" is a blended return of the index "including U.S." and the index "excluding U.S." for the applicable periods. See additional footnotes on next page. 11 -------------------------------------------------------------------------------- THE LAZARD FUNDS, INC. PERFORMANCE TABLE (CONTINUED) --------------------------------------------------------------------------------
CUMULATIVE TOTAL RETURNS FOR PERIODS ENDED JUNE 30, 2001 -------------------------------------------------------------- INSTITUTIONAL SHARES -------------------------------------------------------------- ONE THREE FIVE TEN SINCE YEAR YEAR YEAR YEAR INCEPTION* -------------------------------------------------------------- Lazard Equity Portfolio 2.31% 6.75% 65.22% 273.16% 419.00% S&P 500(R) Index** (14.83)% 12.11% 96.56% 308.04% 501.85% S&P/BARRA Value(R) Index** 7.92% 19.35% 95.47% 310.86% 478.59% Russell 1000(R) Value Index** 10.33% 16.94% 100.65% 332.71% 504.65% Lazard Mid Cap Portfolio 27.28% 36.12% -- -- 48.58% Russell Midcap(R) Index** 0.96% 26.58% -- -- 42.42% Russell Midcap Value Index** 23.92% 20.54% -- -- 36.36% Lazard Small Cap Portfolio 21.74% 11.37% 60.96% -- 276.25% Russell 2000(R) Index** 0.65% 16.80% 58.29% -- 219.48% Russell 2000 Value Index** 30.87% 22.24% 87.93% -- 313.02% Lazard Global Equity Portfolio (14.71)% (4.16)% 43.61% -- 51.22% MSCI(R) World(R) Index** (20.30)% 3.43% 48.01% -- 57.54% Lazard International Equity Portfolio (19.27)% (6.48)% 32.48% -- 105.58% MSCI EAFE(R) Index** (23.60)% (3.67)% 15.32% -- 68.62% Lazard International Small Cap Portfolio ( 8.22)% 0.71% 33.73% -- 54.24% MSCI EAFE Small Cap(R) Index** (16.74)% (4.26)% (24.93)% -- (5.57)% Lazard Emerging Markets Portfolio (22.68)% (5.95)% (21.89)% -- (12.76)% MSCI EMF(R) Index** (25.82)% 4.51% (28.17)% -- (24.59)% Lazard Bond Portfolio 8.80% 13.77% 33.41% -- 76.40% Lehman Intermediate Gov't/Corp Bond(R) Index** 11.04% 20.57% 40.32% -- 91.34% Lazard High Yield Portfolio (9.68)% (15.03)% -- -- (7.57)% Merrill Lynch High Yield Master II(R) Index** (0.92)% (1.01)% -- -- 3.52% Lazard International Fixed-Income Portfolio (7.92)% (3.93)% (2.13)% -- 48.53% Salomon World Government Bond Index Ex-US(R)**+ (7.43)% (0.59)% 2.46% -- 66.33% Lazard Strategic Yield Portfolio 3.37% 6.93% 25.60% -- 83.91% One Month LIBOR USD Fixed Index** 5.67% 17.73% 31.30% -- 61.95% Lazard Mortgage Portfolio -- -- -- -- 3.25% Lehman Fixed-Rate MBS(R) Index** -- -- -- -- 3.90%
** The performance data of the indices have been prepared from sources and data that the Investment Manager believes to be reliable, but no representation is made as to their accuracy. These indices are unmanaged, have no fees or costs and assume reinvestment of dividends and distributions, if any. The S&P 500 Index is a market capitalization-weighted index of 500 common stocks, designed to measure performance of the broad domestic economy through changes in the aggregate market value of these stocks, which represent all major industries. The S&P/BARRA Value Index is a capitalization-weighted index of all the stocks in the S&P 500 Index that have low price-to-book ratios. The Russell 1000 Value Index measures the performance of those companies in the Russell 1000 Index (consisting of the 1,000 largest U.S. companies by capitalization) with lower price-to-book ratios and lower forecasted growth values. The Russell Midcap Index measures the performance of the 800 smallest companies in the Russell 1000 Index. The Russell Midcap Value Index measures performance of those companies in the Russell Midcap Index with lower price-to-book ratios and lower forecasted growth values. The Russell 2000 Index is comprised of the 2,000 smallest U.S. companies included in the Russell 3000(R) Index (consisting of the 3,000 largest U.S. companies by capitalization). The Russell 2000 Value Index measures the performance of those companies in the Russell 2000 Index with lower price-to-book ratios and lower forecasted growth values. The Morgan Stanley Capital International (MSCI) World Index represents market value-weighted average returns of selected securities listed on the stock exchanges of Europe, Australasia, the Far East ("EAFE"), New Zealand, Canada and the United States. The MSCI EAFE Index is a broadly diversified international index comprised of equity securities of approximately 1,000 companies located outside the United States. The MSCI EAFE Small Cap Index is an arithmetic, market value-weighted average of the performance of securities of small cap companies listed on the stock exchanges of EAFE Index countries. The MSCI Emerging Markets Free ("EMF") Index is comprised of emerging market securities in countries open to non-local investors. The Lehman Intermediate Gov't/Corp Bond Index is comprised of U.S. Government and corporate bonds in the intermediate maturity range calculated by Lehman Brothers. The Merrill Lynch High Yield Master II Index provides a broad-based measure of the performance of the non-investment grade U.S. domestic bond market. The Salomon World Government Bond Index Ex-US is a market capitalization-weighted index of institutionally traded fixed rate non-U.S. dollar government bonds, fully hedged into U.S. dollars. The One Month London Interbank Offered Rate ("LIBOR") USD Fixed Index is an average derived from sixteen quotations of the rate that banks dealing in Eurodollars charge each other for large loans, as provided by banks determined by the British Bankers Association. The Lehman Fixed-Rate Mortgage-Backed Securities ("MBS") Index is an index of U.S. mortgage-backed securities in the intermediate maturity range calculated by Lehman Brothers. See additional footnotes on previous page. 12 -------------------------------------------------------------------------------- THE LAZARD FUNDS, INC. PERFORMANCE TABLE (CONCLUDED) -------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS FOR PERIODS ENDED JUNE 30, 2001 ---------------------------------------- OPEN SHARES ---------------------------------------- ONE THREE SINCE YEAR YEAR INCEPTION* ------------- ------------ ------------- Lazard Equity Portfolio 2.01% 1.93% 8.35% S&P 500(R) Index** (14.83)% 3.89% 13.04% S&P/BARRA Value(R) Index** 7.92% 6.07% 12.18% Russell 1000(R) Value Index** 10.33% 5.35% 12.55% Lazard Mid Cap Portfolio 26.98% 10.45% 11.09% Russell Midcap(R) Index** 0.96% 8.17% 10.16% Russell Midcap Value Index** 23.92% 6.43% 8.86% Lazard Small Cap Portfolio 21.45% 3.37% 7.97% Russell 2000(R) Index** 0.65% 5.31% 9.12% Russell 2000 Value Index** 30.87% 6.92% 12.12% Lazard Global Equity Portfolio (14.99)% (1.66)% 6.31% MSCI(R) World(R) Index** (20.30)% 1.13% 7.57% Lazard International Equity Portfolio (19.55)% (2.54)% 5.20% MSCI EAFE(R) Index** (23.60)% (1.24)% 3.72% Lazard International Small Cap Portfolio (8.65)% (0.17)% 4.27% MSCI EAFE Small Cap(R) Index** (16.74)% (1.44)% (3.83)% Lazard Emerging Markets Portfolio (22.86)% (2.18)% (6.57)% MSCI EMF(R) Index** (25.82)% 1.48% (6.48)% Lazard Bond Portfolio 8.56% 4.11% 5.21% Lehman Intermediate Gov't/Corp Bond(R) Index** 11.04% 6.43% 6.99% Lazard High Yield Portfolio (9.81)% (5.49)% (4.00)% Merrill Lynch High Yield Master II(R) Index** (0.92)% (0.34)% 0.41% Lazard International Fixed-Income Portfolio (8.17)% (1.58)% (1.79)% Salomon World Government Bond Index Ex-US(R)** (7.43)% (0.20)% (0.64)% Lazard Strategic Yield Portfolio 2.87% 1.83% 2.81% One Month LIBOR USD Fixed Index** 5.67% 5.59% 5.62% CUMULATIVE TOTAL RETURNS FOR PERIODS ENDED JUNE 30, 2001 ------------------------------------------ OPEN SHARES ------------------------------------------ ONE THREE SINCE YEAR YEAR INCEPTION* ------------- ------------ --------------- 2.01% 5.90% 42.25% (14.83)% 12.11% 71.51% 7.92% 19.35% 65.79% 10.33% 16.94% 68.22% 26.98% 34.73% 46.88% 0.96% 26.58% 42.41% 23.92% 20.54% 36.36% 21.45% 10.46% 40.26% 0.65% 16.80% 47.02% 30.87% 22.24% 65.69% (14.99)% (4.91)% 31.01% (20.30)% 3.43% 38.03% (19.55)% (7.43)% 25.21% (23.60)% (3.67)% 17.59% (8.65)% (0.51)% 20.07% (16.74)% (4.26)% (15.73)% (22.86)% (6.41)% (26.22)% (25.82)% 4.51% (25.92)% 8.56% 12.83% 24.54% 11.04% 20.57% 33.93% (9.81)% (15.59)% (12.76)% (0.92)% (1.01)% 1.38% (8.17)% (4.67)% (7.75)% (7.43)% (0.59)% (2.83)% 2.87% 5.60% 13.09% 5.67% 17.73% 27.46%
See footnotes on previous pages. 13 ================================================================================ THE LAZARD FUNDS, INC. PORTFOLIOS OF INVESTMENTS JUNE 30, 2001 (UNAUDITED) -------------------------------------------------------------------------------- DESCRIPTION SHARES VALUE -------------------------------------------------------------------------------- LAZARD EQUITY PORTFOLIO COMMON STOCKS--98.4% AEROSPACE & DEFENSE--2.1% Honeywell International, Inc. .............. 45,600 $1,595,544 United Technologies Corp. .................. 38,000 2,783,880 ---------- 4,379,424 ---------- ALUMINUM--1.0% Alcoa, Inc. ................................ 55,300 2,178,820 ---------- AUTOMOTIVE--1.2% Delphi Automotive Systems Corp. ............ 167,100 2,661,903 ---------- BANKING & FINANCIAL SERVICES--12.2% American Express Co. ....................... 49,200 1,908,960 Bank of America Corp. ...................... 51,950 3,118,559 Citigroup, Inc. ............................ 111,297 5,880,933 FleetBoston Financial Corp. ................ 133,000 5,246,850 J.P. Morgan Chase & Co. .................... 76,236 3,400,126 Merrill Lynch & Co., Inc. .................. 52,300 3,098,775 PNC Financial Services Group ............... 53,100 3,493,449 ---------- 26,147,652 ---------- BREWERY--2.7% Anheuser-Busch Cos., Inc. .................. 138,700 5,714,440 ---------- BROADCASTING--0.9% Charter Communications, Inc., Class A (a) ............................... 85,300 1,991,755 ---------- BUSINESS SERVICES & SUPPLIES--1.7% First Data Corp. ........................... 56,700 3,642,975 ---------- CHEMICALS & PLASTICS--1.2% Du Pont (E.I.) de Nemours & Co. ............ 53,100 2,561,544 ---------- COMPUTER SERVICES--0.6% Electronic Data Systems Corp. .............. 21,300 1,331,250 ---------- COMPUTER SOFTWARE--1.6% Microsoft Corp. (a) ........................ 47,100 3,438,300 ---------- COMPUTERS & BUSINESS EQUIPMENT--5.5% Compaq Computer Corp. ...................... 302,000 4,677,980 Hewlett-Packard Co. ........................ 118,900 3,400,540 International Business Machines Corp. ............................ 33,500 3,785,500 ---------- 11,864,020 ---------- CONGLOMERATES--0.5% Textron, Inc. .............................. 19,200 1,056,768 ---------- COSMETICS & TOILETRIES--1.7% The Gillette Co. ........................... 124,600 3,612,154 ---------- DIVERSIFIED--4.3% Minnesota Mining & Manufacturing Co. ......................... 29,000 $3,308,900 PPG Industries, Inc. ....................... 56,100 2,949,177 Tyco International, Ltd. ................... 52,700 2,872,150 ---------- 9,130,227 ---------- DRUGS & HEALTH CARE--9.5% American Home Products Corp. ............... 65,800 3,845,352 Bristol-Myers Squibb Co. ................... 39,200 2,050,160 Elan Corp. PLC ADR (a) ..................... 54,200 3,306,200 Eli Lilly & Co. ............................ 76,200 5,638,800 Pharmacia Corp. ............................ 58,800 2,701,860 Schering-Plough Corp. ...................... 78,200 2,833,968 ---------- 20,376,340 ---------- ELECTRONICS--2.0% Motorola, Inc. ............................. 134,900 2,233,944 Texas Instruments, Inc. .................... 63,800 2,009,700 ---------- 4,243,644 ---------- FOOD & BEVERAGES--5.6% H.J. Heinz Co. ............................. 66,900 2,735,541 Kraft Foods, Inc., Class A (a) ............. 45,600 1,413,600 PepsiCo, Inc. .............................. 97,900 4,327,180 The Kroger Co. (a) ......................... 133,900 3,347,500 The Quaker Oats Co. ........................ 2,800 255,500 ---------- 12,079,321 ---------- HOTELS & RESTAURANTS--1.6% McDonald's Corp. ........................... 128,300 3,471,798 ---------- INSURANCE--5.5% American General Corp. ..................... 20,500 952,225 American International Group, Inc. ......... 32,600 2,803,600 The Hartford Financial Services Group, Inc. ............................... 78,700 5,383,080 XL Capital, Ltd., Class A .................. 30,700 2,520,470 ---------- 11,659,375 ---------- MANUFACTURING--1.9% General Electric Co. ....................... 83,800 4,085,250 ---------- MULTIMEDIA--6.8% AOL Time Warner, Inc. (a) .................. 101,250 5,366,250 The News Corp. Ltd., ADR ................... 196,200 6,356,880 Viacom, Inc., Class B (a) .................. 55,200 2,856,600 ---------- 14,579,730 ---------- THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS. 14 ================================================================================ THE LAZARD FUNDS, INC. PORTFOLIOS OF INVESTMENTS (CONTINUED) JUNE 30, 2001 (UNAUDITED) -------------------------------------------------------------------------------- DESCRIPTION SHARES VALUE -------------------------------------------------------------------------------- LAZARD EQUITY PORTFOLIO (CONCLUDED) OIL & GAS--7.2% Chevron Corp. ............................ 34,100 $ 3,086,050 Conoco, Inc., Class B .................... 108,474 3,134,899 El Paso Corp. ............................ 47,988 2,521,289 Exxon Mobil Corp. ........................ 36,664 3,202,600 Texaco, Inc. ............................. 51,500 3,429,900 ----------- 15,374,738 ----------- PAPER PRODUCTS--1.0% International Paper Co. .................. 57,500 2,052,750 ----------- PETROLEUM EQUIPMENT & SERVICES--0.6% Schlumberger, Ltd. ....................... 24,700 1,300,455 ----------- RETAIL--1.9% Target Corp. ............................. 116,600 4,034,360 ----------- SEMICONDUCTORS & COMPONENTS--2.2% Agere Systems, Inc., Class A (a) ......... 363,200 2,724,000 Intel Corp. .............................. 68,200 1,994,850 ----------- 4,718,850 ----------- TELECOMMUNICATIONS--8.0% AT&T Wireless Group (a) .................. 188,200 3,077,070 Qwest Communications International, Inc. ..................... 83,400 2,657,958 SBC Communications, Inc. ................. 137,779 5,519,427 Verizon Communications, Inc. ............. 73,100 3,910,850 WorldCom, Inc.-WorldCom Group (a) ............................... 140,100 1,989,420 ----------- 17,154,725 ----------- TOBACCO--2.2% Philip Morris Cos., Inc. ................. 93,500 4,745,125 ----------- UTILITIES--5.2% Constellation Energy Group, Inc. ......... 49,900 2,125,740 Entergy Corp. ............................ 43,500 1,669,965 FPL Group, Inc. .......................... 74,900 4,509,729 Public Service Enterprise Group, Inc. ............................. 55,400 2,709,060 ----------- 11,014,494 ----------- TOTAL COMMON STOCKS (Identified cost $207,753,349)............ 210,602,187 ----------- CONVERTIBLE PREFERRED STOCK--0.6% COMPUTER SERVICES--0.6% Electronic Data Systems Corp., 7.625%, 08/17/04 (Identified cost $1,305,000)............. 26,100 1,375,470 ----------- PRINCIPAL AMOUNT (000) --------- CONVERTIBLE BONDS--1.5% BROADCASTING--0.3% Charter Communications, Inc., Class A, 4.75%, 06/01/06 ..................... $ 673 717,351 ----------- COMPUTERS & BUSINESS EQUIPMENT--1.2% Hewlett-Packard Co., 0.00%, 10/14/17 (l) ................. 4,724 2,522,096 ----------- TOTAL CONVERTIBLE BONDS (Identified cost $3,209,130).......... 3,239,447 ----------- REPURCHASE AGREEMENT--1.9% State Street Corp., 3.88%, 07/02/01, (Dated 06/29/01, collateralized by $3,890,000 United States Treasury Note, 6.00%, 08/15/09, with a value of $4,152,575) (Identified cost $4,070,000)......... 4,070 4,070,000 ----------- TOTAL INVESTMENTS (Identified cost $216,337,479) (b) ......... 102.4% $219,287,104 LIABILITIES IN EXCESS OF CASH AND OTHER ASSETS ............................... ( 2.4) (5,175,128) ------ ----------- NET ASSETS .................................. 100.0% $214,111,976 ====== ============ THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS. 15 ================================================================================ THE LAZARD FUNDS, INC. PORTFOLIOS OF INVESTMENTS (CONTINUED) JUNE 30, 2001 (UNAUDITED) -------------------------------------------------------------------------------- DESCRIPTION SHARES VALUE -------------------------------------------------------------------------------- LAZARD MID CAP PORTFOLIO COMMON STOCKS--97.3% AUTOMOTIVE--2.3% Delphi Automotive Systems Corp. ......... 35,400 $ 563,922 --------- BANKING & FINANCIAL SERVICES--10.6% A.G. Edwards, Inc. ...................... 5,600 252,000 Allied Capital Corp. .................... 10,000 231,500 Capital One Financial Corp. ............. 2,000 120,000 Heller Financial, Inc., Class A ......... 5,000 200,000 Instinet Group, Inc. (a) ................ 25,700 479,048 Mercantile Bankshares Corp. ............. 9,900 387,387 North Fork Bancorporation, Inc. ......... 8,950 277,450 SouthTrust Corp. ........................ 7,400 192,400 TCF Financial Corp. ..................... 8,900 412,159 --------- 2,551,944 --------- BROADCASTING--2.7% Charter Communications, Inc., Class A (a) ............................ 19,900 464,665 USA Networks, Inc. (a) .................. 6,300 176,400 --------- 641,065 --------- BUSINESS SERVICES & SUPPLIES--8.6% Celestica, Inc. (a) ..................... 3,900 200,850 Gartner, Inc., Class A (a) .............. 70,100 771,100 Iron Mountain, Inc. (a) ................. 7,800 349,752 KPMG Consulting, Inc. (a) ............... 22,800 349,980 The Titan Corp. (a) ..................... 16,700 382,430 --------- 2,054,112 --------- COMPUTER SERVICES--1.3% Acxiom Corp. (a) ........................ 24,000 314,160 --------- COMPUTER SOFTWARE--1.1% Intuit, Inc. (a) ........................ 6,800 271,932 --------- COMPUTERS & BUSINESS EQUIPMENT--5.1% Diebold, Inc. ........................... 17,300 556,195 Maxtor Corp. (a) ........................ 83,928 440,622 NCR Corp. (a) ........................... 5,000 235,000 --------- 1,231,817 --------- CONGLOMERATES--2.0% Textron, Inc. ........................... 8,700 478,848 --------- DIVERSIFIED--11.1% Cooper Industries, Inc. ................. 6,200 245,458 Navistar International Corp. (a) ........ 17,300 486,649 Newell Rubbermaid, Inc. ................. 20,100 504,510 PPG Industries, Inc. .................... 10,500 551,985 SPX Corp. (a) ........................... 3,100 388,058 Viad Corp. .............................. 18,400 485,760 --------- 2,662,420 --------- DRUGS & HEALTH CARE--7.0% Biogen, Inc. (a) ........................ 7,900 429,444 Celgene Corp. (a) ....................... 16,000 461,600 King Pharmaceuticals, Inc. (a) .......... 10,200 548,250 MedImmune, Inc. (a) ..................... 5,300 250,160 --------- 1,689,454 --------- ELECTRONICS--0.7% Millipore Corp. ......................... 2,800 173,544 --------- FOOD & BEVERAGES--4.6% PepsiAmericas, Inc. ..................... 38,300 509,390 The Quaker Oats Co. ..................... 6,500 593,125 --------- 1,102,515 --------- INSURANCE--4.5% ACE, Ltd. ............................... 14,500 566,805 Ambac Financial Group, Inc. ............. 8,750 509,250 --------- 1,076,055 --------- OIL & GAS--7.5% Baker Hughes, Inc. ...................... 14,900 499,150 Cooper Cameron Corp. (a) ................ 5,800 323,640 Tidewater, Inc. ......................... 12,200 459,940 USX-Marathon Group ...................... 17,100 504,621 --------- 1,787,351 --------- PAPER PRODUCTS--1.7% Bowater, Inc. ........................... 9,200 411,608 --------- PUBLISHING--2.0% The New York Times Co., Class A ......... 5,600 235,200 Valassis Communications, Inc. (a) ....... 6,900 247,020 --------- 482,220 --------- REAL ESTATE--4.9% Archstone Communities Trust ............. 14,700 378,966 Equity Office Properties Trust .......... 16,700 528,221 Health Care Property Investors, Inc...... 7,600 261,440 --------- 1,168,627 --------- RETAIL--7.1% Blockbuster, Inc., Class A .............. 11,400 208,050 Ross Stores, Inc. ....................... 22,500 538,875 The Limited, Inc. ....................... 30,500 503,860 Venator Group, Inc. (a) ................. 28,800 440,640 --------- 1,691,425 --------- SEMICONDUCTORS & COMPONENTS--1.4% Agere Systems, Inc., Class A (a) ........ 43,700 327,750 --------- THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS. 16 ================================================================================ THE LAZARD FUNDS, INC. PORTFOLIOS OF INVESTMENTS (CONTINUED) JUNE 30, 2001 (UNAUDITED) -------------------------------------------------------------------------------- DESCRIPTION SHARES VALUE -------------------------------------------------------------------------------- LAZARD MID CAP PORTFOLIO (CONCLUDED) TELECOMMUNICATIONS--2.8% Harris Corp. ............................. 24,500 $ 666,645 ---------- UTILITIES--8.3% Constellation Energy Group, Inc. ......... 13,000 553,800 Entergy Corp. ............................ 13,700 525,943 FirstEnergy Corp. ........................ 7,600 244,416 NiSource, Inc. ........................... 6,800 185,844 UtiliCorp United, Inc. ................... 16,000 488,800 ---------- 1,998,803 ---------- TOTAL COMMON STOCKS (Identified cost $21,188,373)............. 23,346,217 ---------- PRINCIPAL AMOUNT (000) ---------- REPURCHASE AGREEMENT--4.5% State Street Corp., 3.88%, 07/02/01, (Dated 06/29/01, collateralized by $1,020,000 United States Treasury Note, 6.625%, 05/15/07, with a value of $1,104,126) (Identified cost $1,081,000)............. $1,081 $ 1,081,000 ----------- TOTAL INVESTMENTS (Identified cost $22,269,373) (b) ........ 101.8% $24,427,217 LIABILITIES IN EXCESS OF CASH AND OTHER ASSETS ............................. (1.8) (441,532) ------ ----------- NET ASSETS ................................ 100.0% $23,985,685 ====== =========== THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS. 17 ================================================================================ THE LAZARD FUNDS, INC. PORTFOLIOS OF INVESTMENTS (CONTINUED) JUNE 30, 2001 (UNAUDITED) -------------------------------------------------------------------------------- DESCRIPTION SHARES VALUE -------------------------------------------------------------------------------- LAZARD SMALL CAP PORTFOLIO COMMON STOCKS--96.6% AIRLINES--0.9% Alaska Air Group, Inc. (a) ................ 192,200 $5,554,580 Atlantic Coast Airlines Holdings, Inc. (a) ....................... 26,200 785,738 ---------- 6,340,318 ---------- AUTO PARTS--0.6% Pennzoil-Quaker State Co. ................. 366,700 4,107,040 ---------- BANKING & FINANCIAL SERVICES--9.6% Allied Capital Corp. ...................... 353,800 8,190,470 Chittenden Corp. .......................... 208,800 7,026,120 Cullen/Frost Bankers, Inc. ................ 151,100 5,114,735 East West Bancorp, Inc. ................... 101,800 2,748,600 Heller Financial, Inc., Class A ........... 306,900 12,276,000 Investment Technology Group, Inc. (a) .......................... 122,400 6,155,496 New York Community Bancorp, Inc............ 230,217 8,667,670 Richmond County Financial Corp. ........... 152,500 5,721,800 Southwest Bancorporation of Texas, Inc. (a) .......................... 80,300 2,425,863 Westamerica Bancorporation ................ 88,200 3,461,850 Wilmington Trust Corp. .................... 72,300 4,529,595 ---------- 66,318,199 ---------- BUSINESS SERVICES & SUPPLIES--11.0% American Management Systems, Inc. (a) ........................ 375,900 8,871,240 Answerthink, Inc. (a) ..................... 824,800 8,239,752 Dendrite International, Inc. (a) .......... 484,400 3,633,000 Gartner, Inc., Class A (a) ................ 777,300 8,550,300 Iron Mountain, Inc. (a) ................... 239,500 10,739,180 MAXIMUS, Inc. (a) ......................... 210,000 8,418,900 The Profit Recovery Group International, Inc. (a) .................. 487,300 5,584,458 The Titan Corp. (a) ....................... 433,400 9,924,860 United Stationers, Inc. (a) ............... 232,800 7,347,168 West Corp. (a) ............................ 223,200 4,912,632 ---------- 76,221,490 ---------- CHEMICALS & PLASTICS--0.7% Ferro Corp. ............................... 207,100 4,516,851 ---------- COMPUTER SERVICES--0.7% Acxiom Corp. (a) .......................... 359,300 4,703,237 ---------- COMPUTER SOFTWARE--2.0% Avant! Corp. (a) .......................... 483,300 $6,427,890 Mentor Graphics Corp. (a) ................. 439,600 7,693,000 ---------- 14,120,890 ---------- COMPUTERS & BUSINESS EQUIPMENT--4.3% Avocent Corp. (a) ......................... 333,600 7,589,400 Black Box Corp. (a) ....................... 94,000 6,331,840 Diebold, Inc. ............................. 188,700 6,066,705 Maxtor Corp. (a) .......................... 1,786,000 9,376,500 ---------- 29,364,445 ---------- CONSTRUCTION MATERIALS--0.8% Dal-Tile International, Inc. (a) .......... 297,900 5,526,045 ---------- CONTAINERS--1.1% Packaging Corp. of America (a) ............ 498,300 7,738,599 ---------- DIVERSIFIED--0.9% Navistar International Corp. (a) .......... 125,300 3,524,689 The Liberty Corp. ......................... 60,600 2,424,000 ---------- 5,948,689 ---------- DRUGS & HEALTH CARE--4.5% Celgene Corp. (a) ......................... 335,500 9,679,175 Manor Care, Inc. (a) ...................... 320,000 10,160,000 Owens & Minor, Inc. ....................... 368,400 6,999,600 Pharmacopeia, Inc. (a) .................... 185,100 4,442,400 ---------- 31,281,175 ---------- EDUCATION--0.5% ITT Educational Services, Inc. (a) ........ 8,100 364,500 Learning Tree International, Inc. (a) ..... 127,900 2,936,584 ---------- 3,301,084 ---------- ELECTRICAL EQUIPMENT--1.9% Axcelis Technologies, Inc. (a) ............ 111,500 1,650,200 Belden, Inc. .............................. 173,620 4,644,335 LTX Corp. (a) ............................. 264,800 6,768,288 ---------- 13,062,823 ---------- ELECTRONICS--1.4% Sensormatic Electronics Corp. (a) ......... 571,500 9,715,500 ---------- FOOD & BEVERAGES--1.4% PepsiAmericas, Inc. ....................... 713,700 9,492,210 ---------- GAS EXPLORATION--1.4% Louis Dreyfus Natural Gas Corp. (a)........ 284,200 9,904,370 ---------- HOMEBUILDERS--0.9% Toll Brothers, Inc. (a) ................... 158,800 6,242,428 ---------- THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS. 18 ================================================================================ THE LAZARD FUNDS, INC. PORTFOLIOS OF INVESTMENTS (CONTINUED) JUNE 30, 2001 (UNAUDITED) -------------------------------------------------------------------------------- DESCRIPTION SHARES VALUE -------------------------------------------------------------------------------- LAZARD SMALL CAP PORTFOLIO (CONTINUED) HOTELS & RESTAURANTS--2.2% Jack in the Box, Inc. (a) .................. 393,900 $10,280,790 Prime Hospitality Corp. (a) ................ 421,700 4,997,145 ----------- 15,277,935 ----------- HOUSEHOLD APPLIANCES & HOME FURNISHINGS--2.3% Furniture Brands International, Inc. (a) ................... 211,700 5,927,600 Harman International Industries, Inc. .......................... 261,100 9,945,299 ----------- 15,872,899 ----------- INDUSTRIAL & MACHINERY--1.2% AMETEK, Inc. ............................... 87,700 2,679,235 Esterline Technologies Corp. (a) ........... 165,000 3,588,750 JLG Industries, Inc. ....................... 143,500 1,772,225 ----------- 8,040,210 ----------- INSURANCE--5.9% AmerUs Group Co. ........................... 198,800 7,051,436 Arthur J. Gallagher & Co. .................. 222,800 5,792,800 Everest Re Group, Ltd. ..................... 167,100 12,499,080 HCC Insurance Holdings, Inc. ............... 134,400 3,292,800 Radian Group, Inc. ......................... 214,642 8,682,269 W.R. Berkley Corp. ......................... 79,400 3,288,748 ----------- 40,607,133 ----------- LEISURE & ENTERTAINMENT--2.8% Bally Total Fitness Holding Corp. (a)....... 366,000 10,837,260 Brunswick Corp. ............................ 340,600 8,184,618 ----------- 19,021,878 ----------- MANUFACTURING--1.0% Crane Co. .................................. 102,510 3,177,810 Federal Signal Corp. ....................... 167,800 3,938,266 ----------- 7,116,076 ----------- MEDICAL PRODUCTS--4.9% American Medical Systems Holdings, Inc. (a) ........................ 331,400 5,086,990 INAMED Corp. (a) ........................... 256,700 7,267,177 Invacare Corp. ............................. 264,200 10,206,046 STERIS Corp. (a) ........................... 376,900 7,556,845 Varian, Inc. (a) ........................... 113,700 3,672,510 ----------- 33,789,568 ----------- MEDICAL SERVICES--1.9% Albany Molecular Research, Inc. (a)......... 104,700 $ 3,979,647 Gene Logic, Inc. (a) ....................... 268,600 5,855,480 Renal Care Group, Inc. (a) ................. 92,400 3,039,036 ----------- 12,874,163 ----------- MEDICAL SUPPLIES--1.5% DENTSPLY International, Inc. ............... 240,000 10,644,000 ----------- OIL & GAS--4.2% Chiles Offshore, Inc. (a) .................. 209,300 3,715,075 Helmerich & Payne, Inc. .................... 289,020 8,907,596 Horizon Offshore, Inc. (a) ................. 199,600 2,694,600 Hydril Co. (a) ............................. 122,600 2,791,602 Kinder Morgan Management, LLC (a)........... 157,500 10,788,750 ----------- 28,897,623 ----------- PUBLISHING--5.4% Banta Corp. ................................ 170,950 5,008,835 Houghton Mifflin Co. ....................... 148,200 8,881,626 Journal Register Co. (a) ................... 294,700 4,744,670 Pulitzer, Inc. ............................. 139,000 7,339,200 R. H. Donnelley Corp. (a) .................. 363,300 11,625,600 ----------- 37,599,931 ----------- REAL ESTATE--7.5% Alexandria Real Estate Equities, Inc........ 207,900 8,274,420 Annaly Mortgage Management, Inc............. 542,100 7,432,191 Catellus Development Corp. (a) ............. 197,200 3,441,140 Charles E. Smith Residential Realty, Inc. .............................. 55,500 2,783,325 Chelsea Property Group, Inc. ............... 109,900 5,154,310 Cousins Properties, Inc. ................... 125,800 3,377,730 FelCor Lodging Trust, Inc. ................. 216,925 5,076,045 Health Care Property Investors, Inc......... 200,800 6,907,520 Kilroy Realty Corp. ........................ 137,600 4,004,160 Reckson Associates Realty Corp. ............ 239,400 5,506,200 ----------- 51,957,041 ----------- RETAIL--6.6% AnnTaylor Stores Corp. (a) ................. 94,100 3,368,780 Blockbuster, Inc., Class A ................. 293,800 5,361,850 Pacific Sunwear of California, Inc. (a)..... 473,300 10,616,119 Ross Stores, Inc. .......................... 510,300 12,221,685 The Children's Place Retail Stores, Inc. (a) .......................... 184,100 4,933,880 Venator Group, Inc. (a) .................... 586,400 8,971,920 ----------- 45,474,234 ----------- THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS. 19 ================================================================================ THE LAZARD FUNDS, INC. PORTFOLIOS OF INVESTMENTS (CONTINUED) JUNE 30, 2001 (UNAUDITED) -------------------------------------------------------------------------------- DESCRIPTION SHARES VALUE -------------------------------------------------------------------------------- LAZARD SMALL CAP PORTFOLIO (CONCLUDED) TELECOMMUNICATIONS EQUIPMENT--1.1% ANTEC Corp. (a) ........................ 260,700 $ 3,232,680 CommScope, Inc. (a) .................... 190,700 4,481,450 ----------- 7,714,130 ----------- TRANSPORTATION--0.7% CNF, Inc. .............................. 166,100 4,692,325 ----------- UTILITIES--2.8% Avista Corp. ........................... 153,300 3,062,934 Orion Power Holdings, Inc. (a) ......... 283,800 6,757,278 Sierra Pacific Resources ............... 580,292 9,278,869 ----------- 19,099,081 ----------- TOTAL COMMON STOCKS (Identified cost $576,884,906).......... 666,583,620 ----------- PRINCIPAL AMOUNT (000) ---------- REPURCHASE AGREEMENT--0.7% State Street Corp., 3.88%, 07/02/01, (Dated 06/29/01, collateralized by $4,390,000 United States Treasury Note, 6.00%, 08/15/09, with a value of $4,686,325) (Identified cost $4,591,000)............... $4,591 $ 4,591,000 ------------ TOTAL INVESTMENTS (Identified cost $581,475,906) (b) ......... 97.3% $671,174,620 CASH AND OTHER ASSETS IN EXCESS OF LIABILITIES ............................. 2.7 18,485,909 ------ ------------ NET ASSETS .................................. 100.0% $689,660,529 ====== ============ THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS. 20 ================================================================================ THE LAZARD FUNDS, INC. PORTFOLIOS OF INVESTMENTS (CONTINUED) JUNE 30, 2001 (UNAUDITED) -------------------------------------------------------------------------------- DESCRIPTION SHARES VALUE -------------------------------------------------------------------------------- LAZARD GLOBAL EQUITY PORTFOLIO COMMON STOCKS--97.9% FINLAND--0.8% UPM-Kymmene Oyj .......................... 29,300 $ 829,083 ---------- FRANCE--8.2% Aventis SA ............................... 20,275 1,620,267 Axa ...................................... 45,880 1,308,345 BNP Paribas SA ........................... 16,140 1,406,082 Lagardere SCA ............................ 18,300 862,263 TotalFinaElf SA .......................... 12,407 1,739,067 Vivendi Universal SA ..................... 19,945 1,163,729 ---------- TOTAL FRANCE ............................. 8,099,753 ---------- GERMANY--4.4% Allianz AG ............................... 4,660 1,361,458 Bayerische Hypo-und Vereinsbank AG .......................... 29,200 1,445,139 E.On AG .................................. 20,700 1,086,564 ThyssenKrupp AG .......................... 32,400 425,589 ---------- TOTAL GERMANY ............................ 4,318,750 ---------- ITALY--1.1% San Paolo-IMI SpA ........................ 85,600 1,098,281 ---------- JAPAN--11.0% Canon, Inc. .............................. 28,000 1,131,585 Fujitsu, Ltd. ............................ 89,000 934,889 Kao Corp. ................................ 31,000 770,588 Mizuho Holdings, Inc. .................... 224 1,041,777 Nissan Motor Co., Ltd. ................... 163,000 1,125,355 NTT DoCoMo, Inc. ......................... 49 852,618 Sankyo Co., Ltd. ......................... 16,000 288,670 Sony Corp. ............................... 16,300 1,071,766 Sumitomo Mitsui Banking Corp. ............ 115,000 949,803 The Nikko Securities Co., Ltd. ........... 126,000 1,009,334 The Sumitomo Trust & Banking Co., Ltd. ............................... 157,000 988,253 Toyota Motor Corp. ....................... 20,400 718,114 ---------- TOTAL JAPAN .............................. 10,882,752 ---------- NETHERLANDS--7.0% ABN AMRO Holding NV ...................... 58,000 1,090,685 Akzo Nobel NV ............................ 26,700 1,131,345 Getronics NV ............................. 56,600 235,032 Heineken NV .............................. 35,827 1,446,122 ING Groep NV ............................. 21,900 1,432,766 Koninklijke (Royal) Philips Electronics NV .......................... 61,779 1,639,223 ---------- TOTAL NETHERLANDS ........................ 6,975,173 ---------- SINGAPORE--1.3% Oversea-Chinese Banking Corp., Ltd. ............................. 196,800 $1,285,357 ---------- SPAIN--2.5% Endesa SA ................................ 93,500 1,492,817 Telefonica SA (a) ........................ 75,951 937,149 ---------- TOTAL SPAIN .............................. 2,429,966 ---------- SWEDEN--1.6% Investor AB, B Shares .................... 123,100 1,568,045 ---------- SWITZERLAND--1.6% Roche Holding AG ......................... 12,100 872,224 Zurich Financial Services AG ............. 2,116 722,019 ---------- TOTAL SWITZERLAND ........................ 1,594,243 ---------- UNITED KINGDOM--9.3% BP PLC ................................... 193,700 1,594,444 Diageo PLC ............................... 134,748 1,480,172 GlaxoSmithKline PLC ...................... 46,157 1,300,058 HSBC Holdings PLC ........................ 144,578 1,715,407 National Grid Group PLC .................. 186,900 1,379,227 Tesco PLC ................................ 220,000 794,704 Vodafone Group PLC ....................... 425,500 943,790 ---------- TOTAL UNITED KINGDOM ..................... 9,207,802 ---------- UNITED STATES--49.1% Agere Systems, Inc., Class A (a) ......... 141,600 1,062,000 American Express Co. ..................... 19,400 752,720 American Home Products Corp. ............. 30,700 1,794,108 Anheuser-Busch Cos., Inc. ................ 35,500 1,462,600 AOL Time Warner, Inc. (a) ................ 37,050 1,963,650 AT&T Wireless Group (a) .................. 70,000 1,144,500 Bank of America Corp. .................... 18,930 1,136,368 Bristol-Myers Squibb Co. ................. 18,000 941,400 Chevron Corp. ............................ 16,500 1,493,250 Citigroup, Inc. .......................... 44,033 2,326,704 Compaq Computer Corp. .................... 77,300 1,197,377 Eli Lilly & Co. .......................... 27,300 2,020,200 Exxon Mobil Corp. ........................ 21,273 1,858,196 First Data Corp. ......................... 21,800 1,400,650 FleetBoston Financial Corp. .............. 40,300 1,589,835 H.J. Heinz Co. ........................... 23,900 977,271 Hewlett-Packard Co. ...................... 34,300 980,980 Intel Corp. .............................. 42,900 1,254,825 International Business Machines Corp. .......................... 15,220 1,719,860 J.P. Morgan Chase & Co. .................. 32,400 1,445,040 Kraft Foods, Inc., Class A (a) ........... 19,300 598,300 McDonald's Corp. ......................... 55,700 1,507,242 THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS. 21 ================================================================================ THE LAZARD FUNDS, INC. PORTFOLIOS OF INVESTMENTS (CONTINUED) JUNE 30, 2001 (UNAUDITED) -------------------------------------------------------------------------------- DESCRIPTION SHARES VALUE -------------------------------------------------------------------------------- LAZARD GLOBAL EQUITY PORTFOLIO (CONCLUDED) Microsoft Corp. (a) ................... 25,100 $ 1,832,300 Minnesota Mining & Manufacturing Co. .................... 13,700 1,563,170 Motorola, Inc. ........................ 28,900 478,584 PepsiCo, Inc. ......................... 34,700 1,533,740 PPG Industries, Inc. .................. 19,500 1,025,115 Qwest Communications International, Inc. .................. 32,900 1,048,523 Schering-Plough Corp. ................. 33,500 1,214,040 Target Corp. .......................... 29,400 1,017,240 Texas Instruments, Inc. ............... 20,500 645,750 The Gillette Co. ...................... 46,000 1,333,540 The Hartford Financial Services Group, Inc. .......................... 22,460 1,536,264 The Kroger Co. (a) .................... 44,100 1,102,500 Tyco International, Ltd. .............. 22,000 1,199,000 United Technologies Corp. ............. 18,800 1,377,288 Verizon Communications, Inc. .......... 21,000 1,123,500 ----------- TOTAL UNITED STATES ................... 48,657,630 ----------- TOTAL COMMON STOCKS (Identified cost $107,321,969)......... 96,946,835 ----------- PRINCIPAL AMOUNT (000) ---------- REPURCHASE AGREEMENT--2.3% State Street Corp., 3.88%, 07/02/01, (Dated 06/29/01, collateralized by $2,180,000 United States Treasury Note, 6.625%, 05/15/07, with a value of $2,359,798) (Identified cost $2,310,000)............... $2,310 $ 2,310,000 ----------- TOTAL INVESTMENTS (Identified cost $109,631,969) (b) ......... 100.2% $99,256,835 LIABILITIES IN EXCESS OF CASH AND OTHER ASSETS ............................... (0.2) (219,739) ------ ----------- NET ASSETS .................................. 100.0% $99,037,096 ====== =========== THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS. 22 ================================================================================ THE LAZARD FUNDS, INC. PORTFOLIOS OF INVESTMENTS (CONTINUED) JUNE 30, 2001 (UNAUDITED) -------------------------------------------------------------------------------- DESCRIPTION SHARES VALUE -------------------------------------------------------------------------------- LAZARD INTERNATIONAL EQUITY PORTFOLIO COMMON STOCKS--97.1% DENMARK--0.8% TDC A/S ................................ 595,230 $21,475,974 ----------- FINLAND--1.0% UPM-Kymmene Oyj ........................ 912,980 25,833,998 ----------- FRANCE--14.3% Alcatel SA ............................. 549,700 11,506,325 Alstom ................................. 997,639 27,781,451 Aventis SA ............................. 436,932 34,917,206 Axa .................................... 1,600,400 45,638,100 BNP Paribas SA ......................... 454,382 39,584,775 Compagnie de Saint-Gobain .............. 117,800 16,022,647 Lagardere SCA .......................... 797,230 37,564,046 Suez SA ................................ 1,856,550 59,786,646 TotalFinaElf SA ........................ 440,460 61,738,479 Vivendi Universal SA ................... 737,030 43,003,426 ----------- TOTAL FRANCE ........................... 377,543,101 ----------- GERMANY--6.4% Allianz AG ............................. 234,109 68,396,886 Bayerische Hypo-und Vereinsbank AG ........................ 1,133,955 56,120,640 E.On AG ................................ 564,210 29,615,968 ThyssenKrupp AG ........................ 1,107,600 14,548,847 ----------- TOTAL GERMANY .......................... 168,682,341 ----------- HONG KONG--0.6% Hutchison Whampoa, Ltd. ................ 1,489,000 15,033,559 ----------- IRELAND--1.3% Elan Corp. PLC ADR (a) ................. 540,650 32,979,650 ----------- ITALY--4.0% Alleanza Assicurazioni ................. 1,970,933 20,811,522 ENI SpA ................................ 4,414,800 53,875,023 San Paolo-IMI SpA ...................... 2,279,800 29,250,721 ----------- TOTAL ITALY ............................ 103,937,266 ----------- JAPAN--23.9% ACOM Co., Ltd. ......................... 207,200 18,292,615 Canon, Inc. ............................ 916,000 37,019,004 East Japan Railway Co. ................. 2,918 16,846,765 Fujitsu, Ltd. .......................... 4,609,000 48,414,642 Hitachi, Ltd. .......................... 5,199,000 51,068,680 Japan Tobacco, Inc. .................... 315 2,172,240 Kao Corp. .............................. 1,542,000 $38,330,527 Kyocera Corp. .......................... 146,900 12,957,261 Mizuho Holdings, Inc. .................. 6,904 32,109,053 Nissan Motor Co., Ltd. ................. 8,182,000 56,488,670 NTT DoCoMo, Inc. ....................... 2,143 37,288,991 Orix Corp. ............................. 331,460 32,239,675 Sony Corp. ............................. 827,800 54,429,958 Sumitomo Mitsui Banking Corp. .......... 5,919,000 48,885,976 The Nikko Securities Co., Ltd. ......... 6,417,000 51,403,921 The Sumitomo Trust & Banking Co., Ltd. ............................. 4,610,000 29,018,122 Toyota Motor Corp. ..................... 542,400 19,093,385 Yamanouchi Pharmaceutical Co., Ltd. ............................. 1,588,000 44,567,397 ----------- TOTAL JAPAN ............................ 630,626,882 ----------- NETHERLANDS--12.5% ABN AMRO Holding NV .................... 3,601,660 67,728,890 Akzo Nobel NV .......................... 1,353,900 57,368,109 Getronics NV ........................... 2,476,204 10,282,446 Heineken NV ............................ 1,013,618 40,913,708 ING Groep NV ........................... 905,400 59,234,092 Koninklijke (Royal) Philips Electronics NV ........................ 2,330,902 61,847,340 Wolters Kluwer NV ...................... 1,210,900 32,581,116 ----------- TOTAL NETHERLANDS ...................... 329,955,701 ----------- PORTUGAL--1.0% Portugal Telecom SGPS SA, Registered Shares (a) ................. 3,562,500 24,876,887 Portugal Telecom SGPS SA, Rights, 07/09/01 (a) .................. 3,562,500 483,046 ----------- TOTAL PORTUGAL ......................... 25,359,933 ----------- SINGAPORE--2.7% Oversea-Chinese Banking Corp., Ltd. 4,134,050 27,000,656 United Overseas Bank, Ltd. ............. 6,828,897 43,102,259 ----------- TOTAL SINGAPORE ........................ 70,102,915 ----------- SPAIN--3.1% Endesa SA .............................. 2,900,700 46,312,439 Telefonica SA (a) ...................... 2,780,975 34,314,084 ----------- TOTAL SPAIN ............................ 80,626,523 ----------- SWEDEN--2.9% Electrolux AB, Series B ................ 2,033,800 28,151,099 Investor AB, B Shares .................. 3,879,600 49,418,247 ----------- TOTAL SWEDEN ........................... 77,569,346 ----------- THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS. 23 ================================================================================ THE LAZARD FUNDS, INC. PORTFOLIOS OF INVESTMENTS (CONTINUED) JUNE 30, 2001 (UNAUDITED) -------------------------------------------------------------------------------- DESCRIPTION SHARES VALUE -------------------------------------------------------------------------------- LAZARD INTERNATIONAL EQUITY PORTFOLIO (CONCLUDED) SWITZERLAND--2.8% ABB, Ltd. ............................... 1,158,440 $ 17,539,420 Roche Holding AG ........................ 438,500 31,609,101 Zurich Financial Services AG ............ 74,904 25,558,671 ------------- TOTAL SWITZERLAND ....................... 74,707,192 ------------- UNITED KINGDOM--19.8% BAE Systems PLC ......................... 6,379,148 30,589,682 BP PLC .................................. 7,483,700 61,602,176 British Telecommunications PLC .......... 7,899,950 49,730,982 Cadbury Schweppes PLC ................... 5,341,626 36,070,923 Diageo PLC .............................. 4,904,394 53,873,491 GlaxoSmithKline PLC ..................... 1,469,360 41,385,993 HSBC Holdings PLC ....................... 6,035,384 71,609,391 Invensys PLC ............................ 21,246,200 40,393,380 National Grid Group PLC ................. 3,830,100 28,264,191 Tesco PLC ............................... 9,192,900 33,207,415 The Great Universal Stores PLC .......... 4,245,720 36,383,720 Vodafone Group PLC ...................... 17,571,200 38,974,194 ------------- TOTAL UNITED KINGDOM .................... 522,085,538 ------------- TOTAL COMMON STOCKS (Identified cost $2,856,692,055)......... 2,556,519,919 ------------- PRINCIPAL AMOUNT (000) ---------- REPURCHASE AGREEMENT--2.0% State Street Corp., 3.88%, 07/02/01, (Dated 06/29/01, collateralized by $51,880,000 United States Treasury Note, 6.00%, 08/15/09, with a value of $55,381,900) (Identified cost $54,290,000)......... $ 54,290 $ 54,290,000 -------------- TOTAL INVESTMENTS (Identified cost $2,910,982,055) (b) .................. 99.1% $2,610,809,919 CASH AND OTHER ASSETS IN EXCESS OF LIABILITIES ................. 0.9 23,037,371 ------- -------------- NET ASSETS ............................. 100.0% $2,633,847,290 ======= ============== THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS. 24 ================================================================================ THE LAZARD FUNDS, INC. PORTFOLIOS OF INVESTMENTS (CONTINUED) JUNE 30, 2001 (UNAUDITED) -------------------------------------------------------------------------------- DESCRIPTION SHARES VALUE -------------------------------------------------------------------------------- LAZARD INTERNATIONAL SMALL CAP PORTFOLIO COMMON STOCKS--95.0% AUSTRALIA--1.9% Cochlear, Ltd. ......................... 322,500 $6,415,154 ---------- BELGIUM--1.7% Creyf's NV ............................. 289,103 5,512,506 Creyf's NV STRIP (a) ................... 15,381 130 ---------- TOTAL BELGIUM .......................... 5,512,636 ---------- FINLAND--3.3% Amer Group, Ltd. ....................... 271,800 6,219,095 Sampo Oyj, A Shares .................... 559,000 4,760,930 ---------- TOTAL FINLAND .......................... 10,980,025 ---------- FRANCE--6.8% Carbone-Lorraine SA .................... 160,800 5,750,591 CNP Assurances ......................... 86,674 2,926,322 Neopost SA (a), (c) .................... 113,800 2,917,303 SCOR ADR ............................... 72,700 3,249,690 Societe BIC SA ......................... 210,200 7,659,759 ---------- TOTAL FRANCE ........................... 22,503,665 ---------- GERMANY--4.1% Fielmann AG ............................ 176,300 6,499,134 Kamps AG ............................... 314,400 2,861,546 SCS Standard Computersysteme (a) ....... 16,070 0 Techem AG (a) .......................... 161,546 4,107,064 ---------- TOTAL GERMANY .......................... 13,467,744 ---------- HONG KONG--2.8% Esprit Holdings, Ltd. (a) .............. 6,607,500 7,243,022 Shaw Brothers (Hong Kong), Ltd. ........ 2,812,500 2,109,429 ---------- TOTAL HONG KONG ........................ 9,352,451 ---------- IRELAND--2.8% Waterford Wedgwood PLC ................. 10,136,352 9,277,253 ---------- ITALY--2.2% Industrie Natuzzi SpA ADR .............. 343,100 4,755,366 Interpump Group SpA .................... 719,700 2,457,936 ---------- TOTAL ITALY ............................ 7,213,302 ---------- JAPAN--11.9% ADERANS Co., Ltd. ...................... 64,800 2,213,519 Diamond Lease Co., Ltd. ................ 265,000 3,038,650 Hitachi Medical Corp. .................. 384,000 3,827,375 Hokuto Corp. ........................... 108,840 4,241,540 IMPACT 21 Co., Ltd. .................... 237,600 2,667,308 Japan Digital Laboratory Co., Ltd. ..... 379,900 4,057,628 Kawasumi Laboratories, Inc. ............ 75,000 846,163 Maruichi Steel Tube, Ltd. .............. 201,000 $2,282,223 Meitec Corp. ........................... 75,500 2,524,537 Ministop Co., Ltd. ..................... 175,100 2,514,667 Nippon Shinyaku Co., Ltd. .............. 824,000 4,995,141 Secom Techno Service Co., Ltd. ......... 99,000 2,302,141 Yoshinoya D&C Co., Ltd. ................ 2,330 3,736,669 ---------- TOTAL JAPAN ............................ 39,247,561 ---------- NETHERLANDS--13.7% CSM NV (a) ............................. 448,900 9,377,358 Fugro NV ............................... 139,531 7,780,554 Hunter Douglas NV ...................... 355,376 9,968,505 PinkRoccade NV (c) ..................... 129,333 4,712,938 Telegraaf Holdings MIJ NV .............. 367,300 6,536,634 Wolters Kluwer NV ...................... 265,100 7,132,921 ---------- TOTAL NETHERLANDS ...................... 45,508,910 ---------- NORWAY--1.1% Merkantildata ASA (a) .................. 917,500 1,524,299 P4 Radio Hele Norge ASA ................ 724,800 2,019,872 ---------- TOTAL NORWAY ........................... 3,544,171 ---------- SINGAPORE--2.6% Fraser & Neave, Ltd. ................... 1,309,000 5,711,608 Want Want Holdings, Ltd. ............... 1,760,000 2,780,800 Want Want Holdings, Ltd., Warrants 10/24/04 (a) ................. 155,200 66,736 ---------- TOTAL SINGAPORE ........................ 8,559,144 ---------- SPAIN--7.0% Abengoa SA ............................. 129,200 3,594,573 Aldeasa SA ............................. 217,500 4,510,318 Banco Pastor SA ........................ 106,100 4,181,020 Corporacion Mapfre, Compania Internacional de Reaseguros SA ........ 233,100 4,877,276 Prosegur, CIA de Seguridad SA .......... 477,800 6,174,900 ---------- TOTAL SPAIN ............................ 23,338,087 ---------- SWEDEN--7.8% Elanders AB, B Shares .................. 166,150 1,833,716 Nobel Biocare AB ....................... 305,300 10,304,893 Swedish Match AB ....................... 2,920,300 13,697,719 ---------- TOTAL SWEDEN ........................... 25,836,328 ---------- SWITZERLAND--4.4% Bank Sarasin & Cie, Registered B Shares ................................ 3,146 7,442,527 Edipresse SA ........................... 21,860 7,045,333 ---------- TOTAL SWITZERLAND ...................... 14,487,860 ---------- THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS. 25 ================================================================================ THE LAZARD FUNDS, INC. PORTFOLIOS OF INVESTMENTS (CONTINUED) JUNE 30, 2001 (UNAUDITED) -------------------------------------------------------------------------------- DESCRIPTION SHARES VALUE -------------------------------------------------------------------------------- LAZARD INTERNATIONAL SMALL CAP PORTFOLIO (CONCLUDED) UNITED KINGDOM--20.9% Ashtead Group PLC ........................ 4,219,000 $ 6,268,407 Euromoney Institutional Investor PLC (a) ........................ 244,676 1,240,478 FKI PLC .................................. 1,045,654 4,137,989 Kidde PLC (a) ............................ 6,751,700 7,749,361 Luminar PLC .............................. 535,100 6,608,908 Man Group PLC ............................ 713,527 9,621,535 Northgate PLC ............................ 843,400 5,261,778 Reckitt Benckiser PLC .................... 600,608 8,669,821 Signet Group PLC ADR ..................... 345,012 13,006,952 SSL International PLC .................... 942,023 6,633,255 ----------- TOTAL UNITED KINGDOM ..................... 69,198,484 ----------- TOTAL COMMON STOCKS (Identified cost $302,434,107)............ 314,442,775 ----------- PRINCIPAL AMOUNT (000) ---------- REPURCHASE AGREEMENT--4.3% State Street Corp., 3.88%, 07/02/01, (Dated 06/29/01, collateralized by $13,460,000 United States Treasury Note, 6.00%, 08/15/09, with a value of $14,368,550) (Identified cost $14,085,000).............. $14,085 $ 14,085,000 ------------ TOTAL INVESTMENTS (Identified cost $316,519,107) (b) ......... 99.3% $328,527,775 CASH AND OTHER ASSETS IN EXCESS OF LIABILITIES ............................. 0.7 2,349,803 ------- ------------ NET ASSETS .................................. 100.0% $330,877,578 ======= ============ THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS. 26 ================================================================================ THE LAZARD FUNDS, INC. PORTFOLIOS OF INVESTMENTS (CONTINUED) JUNE 30, 2001 (UNAUDITED) -------------------------------------------------------------------------------- DESCRIPTION SHARES VALUE -------------------------------------------------------------------------------- LAZARD EMERGING MARKETS PORTFOLIO COMMON STOCKS--81.6% ARGENTINA--0.7% Grupo Financiero Galicia SA ADR .......... 171,400 $2,523,008 ---------- BRAZIL--1.2% Petroleo Brasileiro SA ADR ............... 168,400 4,378,400 ---------- CHILE--2.0% Administradora de Fondos de Pensiones Provida SA ADR ................ 296,000 7,104,000 ---------- EGYPT--1.0% Commercial International Bank ............ 405,200 3,566,550 ---------- GREECE--0.9% Cosmote Mobile Communications SA (a) .................................. 361,500 3,247,343 ---------- HONG KONG--5.6% China Mobile (Hong Kong), Ltd. ADR (a) ................................. 384,200 10,292,718 CNOOC, Ltd. ADR (a) ...................... 290,100 5,497,395 Yue Yuen Industrial (Holdings), Ltd. ..... 1,931,300 3,837,938 ---------- TOTAL HONG KONG .......................... 19,628,051 ---------- HUNGARY--2.2% Gedeon Richter Rt. ....................... 97,800 5,446,291 Magyar Tavkozlesi Rt. ADR ................ 145,300 2,172,235 ---------- TOTAL HUNGARY ............................ 7,618,526 ---------- INDIA--7.6% Hindalco Industries, Ltd. ................ 161,400 2,862,929 Hindustan Lever, Ltd. .................... 617,900 2,697,401 Infosys Technologies, Ltd. ............... 26,400 2,110,962 ITC, Ltd. ................................ 148,400 2,381,687 Larsen & Toubro, Ltd. .................... 881,100 4,116,108 Reliance Industries, Ltd. ................ 661,800 5,198,450 State Bank of India ...................... 1,583,500 7,415,924 ---------- TOTAL INDIA .............................. 26,783,461 ---------- INDONESIA--2.1% PT Hanjaya Mandala Sampoerna Tbk 3,870,500 5,454,041 PT Telekomunikasi Indonesia ADR .......... 338,300 1,880,948 ---------- TOTAL INDONESIA .......................... 7,334,989 ---------- ISRAEL--2.2% Bank Hapoalim, Ltd. ...................... 1,844,300 4,520,083 Check Point Software Technologies, Ltd. (a) ................................ 27,849 1,408,324 Teva Pharmaceutical Industries, Ltd. ADR ..................................... 28,900 1,800,470 ---------- TOTAL ISRAEL ............................. 7,728,877 ---------- MEXICO--16.5% Carso Global Telecom, Series A1 (a) ...... 2,959,100 $7,107,722 Cemex SA de CV ADR ....................... 216,185 5,728,902 Fomento Economico Mexicano SA de CV ADR ............................... 180,200 7,714,362 Grupo Financiero Banamex Accival SA de CV, Series O ...................... 4,399,700 11,394,033 Grupo Financiero Banorte SA de CV, Series O (a) ............................ 2,062,300 4,327,300 Grupo Iusacell SA de CV, Series V ADR (a) ................................. 340,200 2,350,782 Grupo Televisa SA ADR (a) ................ 123,900 4,957,239 Kimberly-Clark de Mexico SA de CV, Series A ................................ 801,100 2,371,893 Telefonos de Mexico SA de CV, Series L ADR ............................ 115,600 4,056,404 Tubos de Acero de Mexico SA ADR .......... 268,000 3,390,200 Wal-Mart de Mexico SA de CV, Series C ................................ 2,013,900 4,935,223 ---------- TOTAL MEXICO ............................. 58,334,060 ---------- PERU--0.7% Credicorp, Ltd. .......................... 293,300 2,449,055 ---------- PHILIPPINES--1.5% Philippine Long Distance Telephone Co. ADR ................................. 367,400 5,161,970 ---------- RUSSIA--3.9% LUKOIL ADR ............................... 146,200 7,012,512 Mobile Telesystems ADR (a) ............... 247,700 6,786,980 ---------- TOTAL RUSSIA ............................. 13,799,492 ---------- SOUTH AFRICA--10.9% ABSA Group, Ltd. ......................... 1,132,423 5,323,572 Anglo American Platinum Corp., Ltd. 54,000 2,407,780 Iscor, Ltd. (a) .......................... 1,692,700 6,096,865 Old Mutual PLC ........................... 2,178,300 5,000,351 Sanlam, Ltd. ............................. 4,065,500 5,554,376 Sappi, Ltd. .............................. 332,900 2,931,492 Sasol, Ltd. .............................. 476,900 4,359,470 South African Breweries PLC .............. 770,500 5,837,556 South African Breweries PLC (U.K.) ....... 130,600 998,707 ---------- TOTAL SOUTH AFRICA ....................... 38,510,169 ---------- SOUTH KOREA--12.7% Hynix Semiconductor, Inc. GDR (a), (c) ............................ 347,980 3,740,785 Kookmin Bank ............................. 499,853 6,706,986 Korea Electric Power Corp. ............... 254,900 4,743,237 Korea Telecom Corp. ...................... 9,100 363,860 THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS. 27 ================================================================================ THE LAZARD FUNDS, INC. PORTFOLIOS OF INVESTMENTS (CONTINUED) JUNE 30, 2001 (UNAUDITED) -------------------------------------------------------------------------------- DESCRIPTION SHARES VALUE -------------------------------------------------------------------------------- LAZARD EMERGING MARKETS PORTFOLIO (CONCLUDED) Korea Telecom Corp. ADR ..................... 245,236 $ 5,390,287 Pohang Iron & Steel Co., Ltd. ............... 37,900 3,030,834 Pohang Iron & Steel Co., Ltd. ADR ........... 120,800 2,382,176 Samsung Electronics Co., Ltd. ............... 64,681 9,549,213 Samsung Fire & Marine Insurance ............. 79,438 2,537,985 SK Telecom Co., Ltd. ........................ 44,430 6,542,365 ----------- TOTAL SOUTH KOREA ........................... 44,987,728 ----------- TAIWAN--7.5% China Steel Corp. GDR ....................... 314,244 3,142,440 Compal Electronics, Inc. GDR ................ 325,105 1,771,822 Far Eastern Textile, Ltd. ................... 520 290 Fubon Insurance Co. ......................... 8,770,000 7,259,512 Taiwan Cellular Corp. (a) ................... 2,649,095 3,454,672 Taiwan Semiconductor Manufacturing Co., Ltd. (a) ................ 2,875,600 5,345,292 United Microelectronics Corp. ADR (a) .................................... 479,800 4,270,220 Via Technologies, Inc. (a) .................. 194,000 1,341,040 ----------- TOTAL TAIWAN ................................ 26,585,288 ----------- TURKEY--1.8% Turkcell Iletisim Hizmetleri AS ADR (a) .................................... 618,641 1,732,195 Turkiye Garanti Bankasi AS (a), (c) ......... 352,400 1,744,380 Yapi ve Kredi Bankasi AS (a) ................ 913,979,367 2,847,060 ----------- TOTAL TURKEY ................................ 6,323,635 ----------- VENEZUELA--0.6% Compania Anonima Nacional Telefonos de Venezuela ADR ................. 94,200 2,208,048 ----------- TOTAL COMMON STOCKS (Identified cost $304,122,524)............... 288,272,650 ----------- PREFERRED STOCKS--13.2% BRAZIL--13.2% Banco Bradesco SA ........................... 829,571,208 $4,353,854 Banco Itau SA ............................... 89,750,400 7,863,622 Companhia Brasileira de Distri- buicao Grupo Pao de Acucar ADR ............. 213,600 4,957,656 Companhia de Bebidas das Americas 40,167,700 9,408,179 Companhia Paranaense de Energia-Copel .............................. 208,499,000 1,564,534 Companhia Paranaense de Energia-Copel ADR .......................... 858,100 6,444,331 Embratel Participacoes SA ADR ............... 491,400 3,675,672 Tele Norte Leste Participacoes SA ADR ........................................ 347,283 5,299,539 Telesp Celular Participacoes SA ADR 191,500 2,901,225 ---------- TOTAL BRAZIL ................................ 46,468,612 ---------- TOTAL PREFERRED STOCKS (Identified cost $51,501,159)................ 46,468,612 ---------- PRINCIPAL AMOUNT (000) --------- REPURCHASE AGREEMENT--4.0% State Street Corp., 3.88%, 07/02/01, (Dated 06/29/01, collateralized by $13,475,000 United States Treasury Note, 6.00%, 08/15/09, with a value of $14,384,563) (Identified cost $14,101,000)................... $14,101 14,101,000 ---------- TOTAL INVESTMENTS (Identified cost $369,724,683) (b) .............. 98.8% $348,842,262 CASH AND OTHER ASSETS IN EXCESS OF LIABILITIES .................................. 1.2 4,328,432 ------- ------------ NET ASSETS ....................................... 100.0% $353,170,694 ======= ============ THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS. 28 ================================================================================ THE LAZARD FUNDS, INC. PORTFOLIOS OF INVESTMENTS (CONTINUED) JUNE 30, 2001 (UNAUDITED) -------------------------------------------------------------------------------- DESCRIPTION SHARES VALUE -------------------------------------------------------------------------------- LAZARD INTERNATIONAL EQUITY SELECT PORTFOLIO COMMON STOCKS--88.0% DENMARK--2.2% Den Danske Bank ADR ..................... 410 $ 7,367 -------- FINLAND--1.9% Nokia Oyj ADR ........................... 295 6,502 -------- FRANCE--17.0% Alcatel SA ADR .......................... 455 9,437 Aventis SA ADR .......................... 130 10,385 Axa ADR ................................. 365 10,282 Societe Generale ADR .................... 775 9,179 TotalFinaElf SA ADR ..................... 130 9,126 Vivendi Universal SA ADR ................ 170 9,860 -------- TOTAL FRANCE ............................ 58,269 -------- GERMANY--5.4% Deutsche Bank AG ADR .................... 125 8,931 Siemens AG ADR .......................... 155 9,593 -------- TOTAL GERMANY ........................... 18,524 -------- ITALY--3.0% ENI SpA ADR ............................. 165 10,180 -------- JAPAN--8.3% Canon, Inc. ADR ......................... 165 6,798 Kao Corp. ADR ........................... 24 5,966 Nintendo Co., Ltd. ADR .................. 270 6,142 Sony Corp. ADR .......................... 145 9,541 -------- TOTAL JAPAN ............................. 28,447 -------- NETHERLANDS--12.8% ABN AMRO Holding NV ADR ................. 500 9,465 Aegon NV American Registered Shares ..... 340 9,656 Heineken NV ADR ......................... 160 6,452 ING Groep NV ADR ........................ 145 9,551 Royal Dutch Petroleum Co. NY Shares ..... 150 8,740 -------- TOTAL NETHERLANDS ....................... 43,864 -------- SPAIN--2.7% Endesa SA ADR ........................... 580 $ 9,210 -------- SWEDEN--2.1% Electrolux AB, Series B ADR ............. 260 7,205 -------- SWITZERLAND--8.6% Nestle SA ADR ........................... 180 9,564 Novartis AG ADR ......................... 275 9,942 Zurich Financial Services AG ADR ........ 295 10,061 -------- TOTAL SWITZERLAND ....................... 29,567 -------- UNITED KINGDOM--24.0% AstraZeneca PLC ADR ..................... 190 8,883 BP PLC ADR .............................. 180 8,973 British Telecommunications PLC ADR ...... 160 10,344 Cadbury Schweppes PLC ADR ............... 365 9,928 Diageo PLC ADR .......................... 220 9,669 GlaxoSmithKline PLC ADR ................. 175 9,835 HSBC Holdings PLC ADR ................... 100 5,990 Marconi PLC ADR ......................... 1,200 8,976 Unilever PLC ADR ........................ 275 9,487 -------- TOTAL UNITED KINGDOM .................... 82,085 -------- TOTAL COMMON STOCKS (Identified cost $311,724)............... 301,220 -------- TOTAL INVESTMENTS (Identified cost $311,724) (b) .......... 88.0% $301,220 CASH AND OTHER ASSETS IN EXCESS OF LIABILITIES ............................. 12.0 41,215 ----- -------- NET ASSETS ............................... 100.0% $342,435 ===== ======== THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS. 29 ================================================================================ THE LAZARD FUNDS, INC. PORTFOLIOS OF INVESTMENTS (CONTINUED) JUNE 30, 2001 (UNAUDITED) -------------------------------------------------------------------------------- PRINCIPAL AMOUNT DESCRIPTION (000) VALUE ------------------------------------------------------------------------------- LAZARD BOND PORTFOLIO ASSET-BACKED SECURITIES--12.3% Associates Automobile Receivables Trust, Series 2000-1, Class M, 7.51%, 05/15/05 ......................... $ 400 $ 416,257 Chevy Chase Auto Receivables Trust, Series 2001-1, Class A4, 5.41%, 08/15/06 ......................... 390 387,941 CIT Equipment Collateral Trust, Series 2001-1, Class A3, 5.23%, 10/20/04 ......................... 680 686,018 Citibank Credit Card Master Trust I, Series 1999-1, Class B, 5.75%, 02/15/06 ......................... 1,145 1,150,725 Comed Transitional Funding Trust, Series 1998-1, Class A6, 5.63%, 06/25/09 ......................... 355 350,445 Connecticut RRB Special Purpose Trust, Series 2001-1, Class A3, 5.73%, 03/30/09 ......................... 380 377,172 First USA Credit Card Master Trust, Series 1998-1, Class C, 6.50%, 01/18/06 (c) ..................... 400 407,316 Ford Credit Auto Owner Trust, Series 2000-G, Class B, 6.92%, 04/15/05 ......................... 690 713,854 Illinois Power Special Purpose Trust, Series 1998-1, Class A7, 5.65%, 12/25/10 ......................... 335 324,424 MBNA Master Credit Card Trust, Series 1998-J, Class A, 5.25%, 02/15/06 ......................... 1,204 1,210,766 Sears Credit Account Master Trust, Series 2000-1, Class A, 7.25%, 11/15/07 ......................... 590 616,049 --------- TOTAL ASSET-BACKED SECURITIES (Identified cost $6,509,970).............. 6,640,967 --------- COLLATERALIZED MORTGAGE OBLIGATIONS--4.5% Asset Securitization Corp.: Series 1996-D2, Class ACS2, 1.4848%, 02/14/29 (d), (i) .............. 2,125 123,526 Series 1996-D3, Class A1A, 7.01%, 10/13/26 ......................... 22 23,214 Merrill Lynch Mortgage Investors, Inc.: Series 1996-C1, Class IO, 1.0624%, 04/25/28 (c), (d), (i) ......... 3,138 72,685 Series 1998-C3, Class A1, 5.65%, 12/15/30 ......................... 817 813,801 Morgan Stanley Capital I, Inc.: Series 1996-WF1, Class X, 1.3732%, 11/15/28 (c), (d), (i) ......... 2,384 109,680 Series 1999-Life, Class A1, 6.97%, 04/15/33 ......................... 1,214 1,250,084 Prudential Home Mortgage Securities, Series 1993-41, Class A5, 0.1148%, 10/25/10 (d), (i) .............. 152 0 Structured Asset Securities Corp.: Series 1996-CFL, Class X2, 1.0235%, 02/25/28 (d), (i) .............. 500 6,886 Series 1996-CFL, Class X1, 1.6002%, 02/25/28 (d), (i) .............. 982 58,947 --------- TOTAL COLLATERALIZED MORTGAGE OBLIGATIONS (Identified cost $2,611,072).............. 2,458,823 --------- CORPORATE BONDS--51.9% AUTOMOTIVE & EQUIPMENT RENTAL--0.8% Dura Operating Corp., 9.00%, 05/01/09 (c) ..................... 95 89,300 Renters Choice, Inc., 11.00%, 08/15/08 ........................ 100 102,250 United Rentals, Inc., Series B, 9.25%, 01/15/09 ......................... 150 140,250 Williams Scotsman, Inc., 9.875%, 06/01/07 ........................ 80 76,000 --------- 407,800 --------- BANKING & FINANCIAL SERVICES--15.5% AT&T Capital Corp., 6.60%, 05/15/05 ......................... 902 916,838 Bank of America Corp., 5.875%, 02/15/09 ........................ 900 856,782 Bank One Corp., 6.50%, 02/01/06 ......................... 500 506,950 Countrywide Home Loan, Inc., 6.85%, 06/15/04 ......................... 550 567,166 FleetBoston Financial Corp., 7.25%, 09/15/05 ......................... 520 544,606 Ford Motor Credit Co., 7.50%, 03/15/05 ......................... 645 670,181 General Motors Acceptance Corp., 7.50%, 07/15/05 ......................... 600 627,352 Household Finance Corp., 8.00%, 07/15/10 ......................... 500 537,725 MBNA America Bank NA, 6.75%, 03/15/08 ......................... 429 413,093 THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS. 30 ================================================================================ THE LAZARD FUNDS, INC. PORTFOLIOS OF INVESTMENTS (CONTINUED) JUNE 30, 2001 (UNAUDITED) -------------------------------------------------------------------------------- PRINCIPAL AMOUNT DESCRIPTION (000) VALUE ---------------------------------------------------------------------------- LAZARD BOND PORTFOLIO (CONTINUED) Morgan Stanley Dean Witter & Co., 6.10%, 04/15/06 ...................... $ 560 $ 559,520 National Rural Utilities Cooperative Finance Corp., 7.30%, 09/15/06 ...................... 510 536,948 Paine Webber Group, Inc., 6.55%, 04/15/08 ...................... 520 526,245 Salomon Smith Barney Holdings, 6.25%, 01/15/05 ...................... 630 634,630 Washington Mutual, Inc., 7.50%, 08/15/06 ...................... 470 495,427 --------- 8,393,463 --------- BREWERY--1.5% Anheuser-Busch Cos. Inc., 7.10%, 06/15/07 ...................... 799 827,668 --------- BROADCASTING--0.3% Echostar Broadband Corp., 10.375%, 10/01/07 .................... 75 75,000 Sinclair Broadcast Group, Inc., 8.75%, 12/15/07 ...................... 75 71,438 --------- 146,438 --------- BUILDING & CONSTRUCTION--0.7% Atrium Cos. Inc., Series B, 10.50%, 05/01/09 ..................... 90 80,100 Beazer Homes USA, Inc., 8.625%, 05/15/11 ..................... 65 64,837 Building One Services Corp., 10.50%, 05/01/09 ..................... 135 129,600 Nortek, Inc., 9.875%, 06/15/11 (c) ................. 15 14,438 Penhall International Corp., 12.00%, 08/01/06 ..................... 90 88,200 --------- 377,175 --------- CABLE TELEVISION--0.6% Adelphia Communications Corp., 10.875%, 10/01/10 .................... 55 55,687 Charter Communications Holdings LLC: 0.00%, 01/15/10 (f) .................. 100 67,000 8.625%, 04/01/09 ..................... 50 47,000 International CableTel, Inc., Series B, 11.50%, 02/01/06 (f) ................. 55 37,125 LodgeNet Entertainment Corp., 10.25%, 12/15/06 ..................... 110 111,100 --------- 317,912 --------- CHEMICALS--0.3% ARCO Chemical Co., 9.80%, 02/01/20 ...................... 180 183,557 --------- COMMERCIAL SERVICES--1.4% Computer Sciences Corp., 6.75%, 06/15/06 ...................... 570 564,631 IT Group, Inc., Series B, 11.25%, 04/01/09 ..................... 145 136,300 Key3Media Group, Inc., 11.25%, 06/15/11 ..................... 55 53,900 --------- 754,831 --------- CONSUMER GOODS--0.0% Royster-Clark, Inc., 10.25%, 04/01/09 ..................... 30 23,850 --------- CONTAINERS--0.3% Silgan Holdings, Inc., 9.00%, 06/01/09 ...................... 85 84,150 U.S. Can Corp., Series B, 12.375%, 10/01/10 .................... 75 75,375 --------- 159,525 --------- ENERGY--2.3% Calpine Canada Energy Finance, 8.50%, 05/01/08 ...................... 25 24,374 Dynegy Holdings, Inc., 7.45%, 07/15/06 ...................... 682 704,100 Midamerican Energy Co., 6.375%, 06/15/06 ..................... 454 449,755 Orion Power Holdings, Inc., 12.00%, 05/01/10 (c) ................. 70 77,700 --------- 1,255,929 --------- FIBER OPTICS--0.0% Metromedia Fiber Network, Inc., Series B, 10.00%, 11/15/08 ..................... 25 9,625 --------- FOOD & BEVERAGES--2.0% Agrilink Foods, Inc., 11.875%, 11/01/08 .................... 45 41,400 ConAgra Foods, Inc., 7.875%, 09/15/10 ..................... 450 472,885 Michael Foods, Inc., 11.75%, 04/01/11 (c) ................. 80 82,000 Nabisco, Inc., 7.05%, 07/15/07 ...................... 500 508,665 --------- 1,104,950 --------- THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS. 31 ================================================================================ THE LAZARD FUNDS, INC. PORTFOLIOS OF INVESTMENTS (CONTINUED) JUNE 30, 2001 (UNAUDITED) -------------------------------------------------------------------------------- PRINCIPAL AMOUNT DESCRIPTION (000) VALUE -------------------------------------------------------------------------------- LAZARD BOND PORTFOLIO (CONTINUED) HEALTHCARE--0.7% Dynacare, Inc., 10.75%, 01/15/06 ............... $ 115 $ 116,725 Fresenius Medical Capital Trust: 7.875%, 02/01/08 ............... 87 86,347 9.00%, 12/01/06 ................ 75 77,250 HEALTHSOUTH Corp., 10.75%, 10/01/08 ............... 70 75,950 --------- 356,272 --------- INDUSTRIAL & MACHINERY--2.3% Unilever Capital Corp., 7.125%, 11/01/10 ............... 560 582,565 URS Corp., Series B, 12.25%, 05/01/09 ............... 85 86,912 USX Corp., 6.65%, 02/01/06 ................ 570 579,107 --------- 1,248,584 --------- INSURANCE--0.8% American Financial Group, 7.125%, 04/15/09 ............... 459 430,978 --------- LODGING & ENTERTAINMENT--0.8% Ameristar Casinos, Inc., 10.75%, 02/15/09 (c) ........... 120 125,400 John Q. Hammons Hotels, Inc., 8.875%, 02/15/04 ............... 95 94,050 Mandalay Resort Group, Series B, 10.25%, 08/01/07 ............... 75 78,563 MGM Grand, Inc., 9.75%, 06/01/07 ................ 125 133,437 --------- 431,450 --------- MANUFACTURING--1.1% Tyco International Group SA, 6.75%, 02/15/11 ................ 590 585,068 --------- MULTIMEDIA--1.4% AOL Time Warner, Inc., 6.125%, 04/15/06 ............... 630 628,230 Nextmedia Operating, Inc., 10.75%, 07/01/11 (c) ........... 25 25,000 PRIMEDIA, Inc., 7.625%, 04/01/08 ............... 90 81,000 --------- 734,230 --------- OIL & GAS--3.5% Chesapeake Energy Corp., 8.125%, 04/01/11 (c) ........... 90 84,150 Comstock Resources, Inc., 11.25%, 05/01/07 ............... 60 63,450 KeySpan Corp., 7.25%, 11/15/05 ................ 480 502,411 Lomak Petroleum Corp., 8.75%, 01/15/07 ................ 85 81,600 ONEOK, Inc., 7.75%, 08/15/06 ................ 436 459,858 Plains Resources, Inc., Series F, 10.25%, 03/15/06 ............... 40 41,500 Texaco Capital, Inc., 6.00%, 06/15/05 ................ 637 645,122 --------- 1,878,091 --------- PAPER PRODUCTS--0.1% Caraustar Industries, Inc., 9.875%, 04/01/11 (c) ........... 35 32,200 --------- PHOTOGRAPHY--1.0% Eastman Kodak Co., 6.375%, 06/15/06 ............... 550 543,400 --------- PRINTING--0.4% Phoenix Color Corp., 10.375%, 02/01/09 .............. 155 125,550 Quebecor Media, Inc., 11.125%, 07/15/11 (c) .......... 30 29,738 Transwestern Publishing Co., 9.625%, 11/15/07 (c) ........... 70 70,525 --------- 225,813 --------- RETAIL--0.1% Petro Stopping Centers, 10.50%, 02/01/07 ............... 80 62,000 --------- TELECOMMUNICATIONS--3.8% American Cellular Corp., 9.50%, 10/15/09 (c) ............ 90 84,600 American Tower Corp., 9.375%, 02/01/09 (c) ........... 60 55,950 Cox Communications, Inc., 6.15%, 08/01/03 (d) ............ 988 994,780 Global Crossing Holdings, Ltd., 9.50%, 11/15/09 ................ 35 27,387 Nextel Communications, Inc., 9.375%, 11/15/09 ............... 135 106,650 THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS. 32 ================================================================================ THE LAZARD FUNDS, INC. PORTFOLIOS OF INVESTMENTS (CONTINUED) JUNE 30, 2001 (UNAUDITED) -------------------------------------------------------------------------------- PRINCIPAL AMOUNT DESCRIPTION (000) VALUE -------------------------------------------------------------------------------- LAZARD BOND PORTFOLIO (CONTINUED) Spectrasite Holdings, Inc.: 0.00%, 04/15/09 (f) ................. $ 35 $ 16,100 Series B, 0.00%, 03/15/10 (f) ................. 25 10,500 US West Communications, Inc., 5.625%, 11/15/08 .................... 836 766,071 ---------- 2,062,038 ---------- TELEPHONE--2.9% GTE Corp., 9.10%, 06/01/03 ..................... 395 424,593 Sprint Capital Corp., 7.125%, 01/30/06 .................... 500 503,435 WorldCom, Inc., 7.75%, 04/01/07 ..................... 600 613,584 XO Communications, Inc., 10.75%, 11/15/08 .................... 20 6,400 ---------- 1,548,012 ---------- TRANSPORTATION--1.4% CSX Corp., 6.75%, 03/15/11 ..................... 510 499,923 Interpool, Inc.: 6.625%, 03/01/03 .................... 70 68,014 7.35%, 08/01/07 ..................... 55 48,400 North American Van Lines, Inc., 13.375%, 12/01/09 (c) ............... 125 115,000 ---------- 731,337 ---------- UTILITIES--5.7% AES Corp., 9.375%, 09/15/10 .................... 135 136,350 American Electric Power, Inc., Series A, 6.125%, 05/15/06 .................... 430 423,408 Dominion Resources, Inc., Series B, 7.625%, 07/15/05 .................... 545 569,937 Progress Energy, Inc., 6.75%, 03/01/06 ..................... 485 493,725 Texas Utilities Co., Series B, 6.375%, 10/01/04 .................... 821 827,256 Wisconsin Energy Corp., 5.875%, 04/01/06 .................... 650 645,819 ---------- 3,096,495 ---------- WASTE MANAGEMENT--0.2% Allied Waste North America, Inc., Series B, 10.00%, 08/01/09 .................... 120 123,300 ---------- TOTAL CORPORATE BONDS (Identified cost $27,904,837)......... 28,051,991 ---------- MORTGAGE PASS-THROUGH SECURITIES--3.2% Federal Home Loan Mortgage Corp.: Pool#W10002, 6.775%, 11/01/03 .................... 719 742,582 Pool#410425, 8.309%, 09/01/26 (d) ................ 29 29,998 Federal National Mortgage Association: Pool#342042, 7.705%, 06/01/25 (d) ................ 51 51,639 Pool#303824, 7.999%, 07/01/25 (d) ................ 69 70,451 Government National Mortgage Association: Pool#80208, 7.375%, 06/20/28 (d) ................ 487 494,567 Pool#80120, 7.625%, 10/20/27 (d) ................ 260 266,490 Pool#80093, 7.75%, 07/20/27 (d) ................. 58 59,657 ---------- TOTAL MORTGAGE PASS-THROUGH SECURITIES (Identified cost $1,494,609).......... 1,715,384 ---------- U.S. GOVERNMENT SECURITIES--9.7% Federal Home Loan Mortgage Corp., 5.25%, 02/15/04 ..................... 500 503,985 Federal National Mortgage Association: 6.00%, 12/15/05 ..................... 750 764,880 6.625%, 09/15/09 .................... 1,150 1,190,066 6.625%, 11/15/10 .................... 570 588,878 7.125%, 02/15/05 .................... 2,055 2,177,334 Resolution Funding Corp. STRIP Principal, 0.00%, 01/15/21 (l) ................. 29 8,383 ---------- TOTAL U.S. GOVERNMENT SECURITIES (Identified cost $5,164,242).......... 5,233,526 ---------- THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS. 33 ================================================================================ THE LAZARD FUNDS, INC. PORTFOLIOS OF INVESTMENTS (CONTINUED) JUNE 30, 2001 (UNAUDITED) -------------------------------------------------------------------------------- PRINCIPAL AMOUNT DESCRIPTION (000) VALUE -------------------------------------------------------------------------------- LAZARD BOND PORTFOLIO (CONCLUDED) U.S. TREASURY SECURITIES--15.7% United States Treasury Notes: 5.75%, 04/30/03 ...................... $ 2,150 $ 2,205,427 5.75%, 11/15/05 ...................... 2,350 2,406,893 6.00%, 08/15/09 ...................... 2,955 3,100,888 7.50%, 02/15/05 ...................... 660 718,265 United States Treasury STRIP Principal, 0.00%, 11/15/09 (l) .................. 39 24,346 ----------- TOTAL U.S. TREASURY SECURITIES (Identified cost $8,530,870)........... 8,455,819 ----------- REPURCHASE AGREEMENT--1.4% State Street Corp., 3.88%, 07/02/01, (Dated 06/29/01, collaterized by $165,000 United States Treasury Note, 6.625%, 05/15/07, with a value of $178,609, and $590,000 United States Treasury Bill, 3.38%, 12/20/01, with a value of $579,970) (Identified cost $738,000)............ 738 738,000 ----------- TOTAL INVESTMENTS (Identified cost $52,953,600) (b)...... 98.7% $53,294,510 CASH AND OTHER ASSETS IN EXCESS OF LIABILITIES ........................ 1.3 718,997 ----- ----------- NET ASSETS ............................. 100.0% $54,013,507 ===== =========== THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS. 34 ================================================================================ THE LAZARD FUNDS, INC. PORTFOLIOS OF INVESTMENTS (CONTINUED) JUNE 30, 2001 (UNAUDITED) -------------------------------------------------------------------------------- PRINCIPAL AMOUNT DESCRIPTION (000) VALUE -------------------------------------------------------------------------------- LAZARD HIGH YIELD PORTFOLIO CORPORATE BONDS--85.6% AEROSPACE & DEFENSE--1.6% Sabreliner Corp., 11.00%, 06/15/08 (c) ................. $ 1,465 $1,100,581 ---------- AUTOMOTIVE & EQUIPMENT RENTAL--6.4% LDM Technologies, Inc., Series B, 10.75%, 01/15/07 ..................... 840 520,800 National Equipment Services, Inc.: Series B, 10.00%, 11/30/04 ..................... 545 425,100 Series D, 10.00%, 11/30/04 ..................... 545 425,100 Renters Choice, Inc., 11.00%, 08/15/08 ..................... 440 449,900 United Rentals, Inc., Series B: 9.00%, 04/01/09 ...................... 690 638,250 9.25%, 01/15/09 ...................... 1,020 953,700 Williams Scotsman, Inc., 9.875%, 06/01/07 ..................... 925 878,750 ---------- 4,291,600 ---------- BROADCASTING--3.0% Echostar Broadband Corp., 10.375%, 10/01/07 .................... 425 425,000 Emmis Escrow Corp., 0.00%, 03/15/11 (c), (f) ............. 1,675 946,375 Sinclair Broadcast Group, Inc., 8.75%, 12/15/07 ...................... 300 285,750 United International Holding, Inc., Series B, 0.00%, 02/15/08 (f) .................. 1,075 360,125 ---------- 2,017,250 ---------- BUILDING & CONSTRUCTION--6.6% Ainsworth Lumber Co. Ltd., 12.50%, 07/15/07 ..................... 655 602,600 Atrium Cos. Inc., Series B, 10.50%, 05/01/09 ..................... 1,305 1,161,450 Building Materials Corp., Series B, 7.75%, 07/15/05 ...................... 920 561,200 Building One Services Corp., 10.50%, 05/01/09 ..................... 570 547,200 Nortek, Inc., 9.875%, 06/15/11 (c) ................. 690 664,125 Penhall International Corp., 12.00%, 08/01/06 ..................... 890 872,200 ---------- 4,408,775 ---------- CABLE TELEVISION--7.4% Charter Communications Holdings LLC, 0.00%, 01/15/10 (f) .................. 1,605 1,075,350 Diamond Cable Communications PLC, 11.75%, 12/15/05 (f) ................. 135 89,100 Golden Sky DBS, Inc., Series B, 0.00%, 03/01/07 (f) .................. 820 500,200 International CableTel, Inc., Series B, 11.50%, 02/01/06 (f) ................. 610 411,750 LodgeNet Entertainment Corp., 10.25%, 12/15/06 ..................... 985 994,850 Northland Cable Television, 10.25%, 11/15/07 ..................... 555 388,500 Ono Finance PLC: 13.00%, 05/01/09 ..................... 1,060 795,000 14.00%, 02/15/11 (c) ................. 470 399,500 United Pan-Europe Communications NV, Series B: 0.00%, 08/01/09 (f) .................. 1,060 233,200 0.00%, 02/01/10 (f) .................. 400 88,000 ---------- 4,975,450 ---------- CHEMICALS--3.8% ARCO Chemical Co., 9.80%, 02/01/20 ...................... 735 749,526 Huntsman Corp., 9.50%, 07/01/07 (c) .................. 1,640 902,000 Lyondell Chemical Co., 10.875%, 05/01/09 .................... 220 216,150 PMD Group, Inc., 11.00%, 02/28/11 (c) ................. 665 674,975 ---------- 2,542,651 ---------- COMMERCIAL SERVICES--4.4% Integrated Electrical Services, Inc., 9.375%, 02/01/09 (c) ................. 545 534,100 IT Group, Inc., Series B, 11.25%, 04/01/09 ..................... 1,700 1,598,000 Key3Media Group, Inc., 11.25%, 06/15/11 ..................... 840 823,200 ---------- 2,955,300 ---------- COMPUTER SERVICES--0.1% Concentric Network Corp., 12.75%, 12/15/07 ..................... 250 76,250 ---------- CONSUMER GOODS--0.5% Royster-Clark, Inc., 10.25%, 04/01/09 ..................... 390 310,050 ---------- THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS. 35 ================================================================================ THE LAZARD FUNDS, INC. PORTFOLIOS OF INVESTMENTS (CONTINUED) JUNE 30, 2001 (UNAUDITED) -------------------------------------------------------------------------------- PRINCIPAL AMOUNT DESCRIPTION (000) VALUE -------------------------------------------------------------------------------- LAZARD HIGH YIELD PORTFOLIO (CONTINUED) CONTAINERS--1.0% U.S. Can Corp., Series B, 12.375%, 10/01/10 ............... $ 635 $ 638,175 --------- FIBER OPTICS--0.4% Metromedia Fiber Network, Inc., Series B, 10.00%, 11/15/08 ................ 670 257,950 --------- FOOD & BEVERAGES--2.5% Agrilink Foods, Inc., 11.875%, 11/01/08 ............... 705 648,600 Michael Foods, Inc., 11.75%, 04/01/11 (c) ............ 760 779,000 Travelcenters of America, Inc., 12.75%, 05/01/09 ................ 270 277,763 --------- 1,705,363 --------- FUNERAL SERVICES--2.9% Rose Hills Co., 9.50%, 11/15/04 ................. 1,350 1,064,812 Stewart Enterprises, Inc., 10.75%, 07/01/08 (c) ............ 820 844,600 --------- 1,909,412 --------- HEALTHCARE--5.9% Alliance Imaging, Inc., 10.375%, 04/15/11 (c) ........... 1,000 1,025,000 Dynacare, Inc., 10.75%, 01/15/06 ................ 995 1,009,925 Fresenius Medical Capital Trust, 7.875%, 02/01/08 ................ 655 650,087 Icon Health & Fitness, Inc., 12.00%, 09/27/05 (c) ............ 1,370 1,233,000 --------- 3,918,012 --------- INDUSTRIAL & MACHINERY--4.8% GSI Group, Inc., 10.25%, 11/01/07 ................ 995 756,200 Interpool Capital Trust, Series B, 9.875%, 02/15/27 ................ 1,600 1,168,000 URS Corp., Series B, 12.25%, 05/01/09 ................ 1,270 1,298,575 --------- 3,222,775 --------- LODGING & ENTERTAINMENT--2.1% Ameristar Casinos, Inc., 10.75%, 02/15/09 (c) ............ 565 590,425 John Q. Hammons Hotels, Inc., 8.875%, 02/15/04 ................ 545 539,550 Mandalay Resort Group, Series B, 10.25%, 08/01/07 ................ 255 267,113 --------- 1,397,088 --------- MANUFACTURING--2.2% Foamex L.P., 13.50%, 08/15/05 ................ 475 375,250 Venture Holdings Trust, Series B, 9.50%, 07/01/05 ................. 1,400 1,092,000 --------- 1,467,250 --------- METALS--0.6% Metals USA, Inc., 8.625%, 02/15/08 ................ 545 370,600 --------- MULTIMEDIA--1.5% Nextmedia Operating, Inc., 10.75%, 07/01/11 (c) ............ 1,015 1,015,000 --------- OIL & GAS--4.9% Chesapeake Energy Corp., 8.125%, 04/01/11 (c) ............ 440 411,400 Comstock Resources, Inc., 11.25%, 05/01/07 ................ 755 798,412 El Paso Energy Partners, 8.50%, 06/01/11 (c) ............. 555 555,000 Lomak Petroleum Corp., 8.75%, 01/15/07 ................. 1,270 1,219,200 Plains Resources, Inc., Series F, 10.25%, 03/15/06 ................ 300 311,250 --------- 3,295,262 --------- PAPER PRODUCTS--1.0% Caraustar Industries, Inc., 9.875%, 04/01/11 (c) ............ 750 690,000 --------- PRINTING--3.4% Phoenix Color Corp., 10.375%, 02/01/09 ............... 1,345 1,089,450 Quebecor Media, Inc., 11.125%, 07/15/11 (c) ........... 1,195 1,184,544 --------- 2,273,994 --------- PUBLISHING--1.2% Canwest Media, Inc., 10.625%, 05/15/11 (c) ........... 825 837,375 --------- REAL ESTATE--1.9% Blum CB Corp., 11.25%, 06/15/11 (c) ............ 1,290 1,267,425 --------- THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS. 36 ================================================================================ THE LAZARD FUNDS, INC. PORTFOLIOS OF INVESTMENTS (CONTINUED) JUNE 30, 2001 (UNAUDITED) -------------------------------------------------------------------------------- PRINCIPAL AMOUNT DESCRIPTION (000) VALUE ----------------------------------------------------------------------------- LAZARD HIGH YIELD PORTFOLIO (CONTINUED) RETAIL--0.2% Petro Stopping Centers, 10.50%, 02/01/07 ....................... $ 205 $ 158,875 ---------- TELECOMMUNICATIONS--10.1% American Tower Corp., 9.375%, 02/01/09 (c) ................... 1,040 969,800 COLT Telecom Group PLC, 0.00%, 12/15/06 (f) .................... 375 330,000 Global Crossing Holdings, Ltd., 9.50%, 11/15/09 ........................ 260 203,450 GT Group Telecom, Inc., 0.00%, 02/01/10 (f) .................... 1,160 365,400 Horizon PCS, Inc., 0.00%, 10/01/10 (f) .................... 1,730 674,700 Hyperion Telecommunications, Inc.: 12.00%, 11/01/07 ....................... 1,525 701,500 Series B, 12.25%, 09/01/04 ....................... 420 350,700 IPCS, Inc., 0.00%, 07/15/10 (f) .................... 2,150 881,500 McCaw International, Ltd., 0.00%, 04/15/07 (f) .................... 860 283,800 Nextel Communications, Inc., 12.00%, 11/01/08 ....................... 500 445,000 Nextel International, Inc.: 0.00%, 04/15/08 (f) .................... 260 54,600 12.75%, 08/01/10 ....................... 670 207,700 Spectrasite Holdings, Inc.: 0.00%, 04/15/09 (f) .................... 830 381,800 Series B, 0.00%, 03/15/10 (f) .................... 430 180,600 Ubiquitel Operating Co., 0.00%, 04/15/10 (f) .................... 1,759 694,805 ---------- 6,725,355 ---------- TELEPHONE--0.6% XO Communications, Inc., 10.75%, 11/15/08 ....................... 1,285 411,200 ---------- TRANSPORTATION--3.4% North American Van Lines, Inc., 13.375%, 12/01/09 (c) .................. 940 864,800 Railamerica Transportation Corp., 12.875%, 08/15/10 ...................... 1,360 1,404,200 ---------- 2,269,000 ---------- WASTE MANAGEMENT--1.2% Allied Waste North America, Inc., Series B, 10.00%, 08/01/09 ....................... 795 816,863 ---------- TOTAL CORPORATE BONDS (Identified cost $61,782,520)............ 57,324,881 ---------- CONVERTIBLE BOND--1.9% FINANCIAL SERVICES--1.9% Telewest Finance (Jersey) Ltd., 6.00%, 07/07/05 (c) (Identified cost $1,363,955)............ 1,780 1,246,000 ---------- SHARES ------ PREFERRED STOCKS--9.4% BROADCASTING--4.2% Granite Broadcasting Corp. (a) .......... 1,940 368,600 Paxson Communications Corp. (a) ......... 153 1,430,550 Sinclair Capital ........................ 10,700 1,003,125 ---------- 2,802,275 ---------- CABLE TELEVISION--2.3% Adelphia Communications Corp., Series B ............................... 15,550 1,523,900 ---------- MANUFACTURING--0.3% High Voltage Engineering Corp., Series A (a) ........................... 1,049 209,800 ---------- RESTAURANTS--0.0% American Restaurant Group, Inc., Series B (a) ........................... 5 500 ---------- TELECOMMUNICATIONS--2.5% Global Crossing Holdings, Ltd. .......... 10,400 800,800 Nextel Communications, Inc., Series E (a) ........................... 1,350 904,500 ---------- 1,705,300 ---------- TELEPHONE--0.1% XO Communications, Inc. (a) ............. 14,603 58,412 ---------- TOTAL PREFERRED STOCKS (Identified cost $8,608,454)............. 6,300,187 ---------- WARRANTS--0.3% CABLE TELEVISION--0.1% Ono Finance PLC, 05/31/09 (a), (c) ...................... 500 15,000 ---------- COMPUTER SERVICES--0.0% Verado Holdings, Inc., Series B, 04/15/08 (a), (c) ...................... 365 1,460 ---------- THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS. 37 ================================================================================ THE LAZARD FUNDS, INC. PORTFOLIOS OF INVESTMENTS (CONTINUED) JUNE 30, 2001 (UNAUDITED) -------------------------------------------------------------------------------- DESCRIPTION SHARES VALUE -------------------------------------------------------------------------------- LAZARD HIGH YIELD PORTFOLIO (CONCLUDED) FOOD & BEVERAGES--0.0% Travelcenters of America, Inc., 05/01/09 (a), (c) ........................ 810 $ 8,100 ----------- TELECOMMUNICATIONS--0.2% GT Group Telecom, Inc., 02/01/10 (a), (c) ........................ 1,160 34,621 Horizon PCS, Inc., 10/01/10 (a), (c) ........................ 1,730 34,600 IPCS, Inc., 07/15/10 (a), (c) ........................ 2,150 43,000 Motient Corp., 04/01/08 (a), (c) ........................ 1,345 673 Ubiquitel Operating Co., 04/15/10 (a), (c) ........................ 1,259 25,180 ----------- 138,074 ----------- TOTAL WARRANTS (Identified cost $398,933)................. 162,634 ----------- PRINCIPAL AMOUNT (000) --------- REPURCHASE AGREEMENT--3.9% State Street Corp., 3.88%, 07/02/01, (Dated 06/29/01, collateralized by $2,485,000 United States Treasury Note, 6.625%, 05/15/07, with a value of $2,689,953) (Identified cost $2,637,000)..............$2,637 $ 2,637,000 ----------- TOTAL INVESTMENTS (Identified cost $74,790,862) (b) ......... 101.1% $67,670,702 LIABILITIES IN EXCESS OF CASH AND OTHER ASSETS .............................. (1.1) (709,874) ----- ----------- NET ASSETS ................................. 100.0% $66,960,828 ===== =========== THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS. 38 ================================================================================ THE LAZARD FUNDS, INC. PORTFOLIOS OF INVESTMENTS (CONTINUED) JUNE 30, 2001 (UNAUDITED) -------------------------------------------------------------------------------- PRINCIPAL AMOUNT DESCRIPTION (000) (g) VALUE -------------------------------------------------------------------------------- LAZARD INTERNATIONAL FIXED-INCOME PORTFOLIO CURRENCY DENOMINATED BONDS--94.4% AUSTRALIA--0.4% Australia Government, 6.50%, 05/15/13 (e) ................ 520 $ 286,913 --------- AUSTRIA--4.4% Pfandbriefstelle Der Oesterr Landeshypobank, 1.60%, 02/15/11................. JPY 305,000 2,570,648 Republic of Austria, 4.50%, 09/28/05................. JPY 80,000 756,860 --------- TOTAL AUSTRIA ....................... 3,327,508 --------- BRAZIL--0.7% Deutsche Bank LTN Linked Notes: 15.20%, 02/08/02 (h) ............USD 226 196,066 17.18%, 08/01/01 (h) ............USD 75 67,230 17.40%, 08/01/01 (h) ............USD 70 62,993 Salomon, Inc. Linked Brazil Inflation Indexed Notes: LTN, 14.90%, 12/06/01 (c), (h) .......USD 112 101,024 NTN, 6.00%, 12/02/02 (c), (h) ........USD 95 81,892 --------- TOTAL BRAZIL ........................ 509,205 --------- CANADA--5.3% Argos Funding Trust, 5.9625%, 02/27/06 (c), (e) ......... 250 153,202 Government of Canada, 5.50%, 06/01/10 .................... 2,800 1,794,280 Molson Breweries Co., Ltd., Series A, 6.00%, 06/02/08 (e) ................ 800 509,642 North American Capital Corp., 8.25%, 11/17/03 (e) .............GBP 576 834,624 Province of Quebec, 5.125%, 01/04/09 (e) ............EUR 400 329,997 Quebec Housing Corp., Series N, 8.95%, 05/13/13 (e) ................ 391 306,344 --------- TOTAL CANADA ........................ 3,928,089 --------- CAYMAN ISLANDS--0.6% Toyo Trust Bank Finance Cayman, Ltd., 4.8275%, 03/18/07 (d) ...........USD 486 476,280 --------- COLOMBIA--0.1% Bank of America Corp. Linked Time Deposit, 11.85%, 07/09/01 (h) ............USD 59 59,277 --------- COSTA RICA--0.0% Salomon, Inc. CRC Linked Unsecured Note, 13.00%, 07/12/01 (c), (h)........USD 40 40,084 --------- DENMARK--6.6% Nykredit: 6.00%, 10/01/29 (e) ................ 11,258 1,222,420 7.00%, 10/01/32 (e) ................ 3,293 373,029 Totalkredit, 7.00%, 10/01/22 .................... 9,600 1,098,985 Unikredit Realkredit: 7.00%, 07/01/29 (e) ................ 14,718 1,680,192 7.00%, 10/01/32 (e) ................ 4,976 563,574 --------- TOTAL DENMARK ....................... 4,938,200 --------- FRANCE--4.4% Government of France: 0.00%, 04/25/23 (l) .............EUR 8,090 1,882,196 4.00%, 10/25/09 (e) .............EUR 1,820 1,422,672 --------- TOTAL FRANCE ........................ 3,304,868 --------- GERMANY--8.7% Bundesrepublik Deutschland, 0.00%, 01/04/24 (e), (l) ........EUR 8,115 1,834,977 Callahan Nordrhein Westfalen, 14.125%, 07/15/11 (c) ...........EUR 330 234,913 Core, Series 1998-1A, Class B3, 7.3377%, 01/16/06 (c), (d) ......EUR 400 175,565 DSL Bank AG, 7.25%, 08/07/07 (e) .............GBP 630 933,892 Frank Hypobank Center, 6.375%, 02/04/08 ................GBP 365 521,509 Land Hessen, 6.00%, 11/29/13 (e), (f) ........EUR 511 471,278 Landesbank Hessen-Thueringen Girozentrale, 9.00%, 09/06/04 .................GBP 230 348,411 Landesbank Schleswig-Holstein, 8.00%, 12/28/06 .................GBP 250 377,231 Landwirtschaftliche Rentenbank, 6.375%, 03/09/05 ................GBP 270 384,233 Messer Griesheim Holding AG, 10.375%, 06/01/11 (c) ...........EUR 125 109,109 Republic of Deutschland, 3.75%, 01/04/09 .................EUR 300 235,803 WestLB Finance Curacao NV: 8.125%, 01/24/07 ................GBP 310 471,211 8.50%, 06/02/03 .................GBP 250 366,845 --------- TOTAL GERMANY ....................... 6,464,977 --------- THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS. 39 ================================================================================ THE LAZARD FUNDS, INC. PORTFOLIOS OF INVESTMENTS (CONTINUED) JUNE 30, 2001 (UNAUDITED) -------------------------------------------------------------------------------- PRINCIPAL AMOUNT DESCRIPTION (000) (g) VALUE -------------------------------------------------------------------------------- LAZARD INTERNATIONAL FIXED-INCOME PORTFOLIO (CONTINUED) GREECE--2.0% Republic of Hellenic: 5.75%, 03/31/08 (e) ........EUR 1,720 $1,480,935 8.90%, 04/01/03 ............EUR 0.1 88 ---------- TOTAL GREECE ................... 1,481,023 ---------- HUNGARY--0.9% Government of Hungary: 9.00%, 11/24/02 ............... 107,480 371,551 9.50%, 01/12/02 ............... 55,300 191,434 12.50%, 09/24/02 .............. 25,100 89,494 ---------- TOTAL HUNGARY .................. 652,479 ---------- ITALY--5.4% Films PLC, 5.5488%, 03/31/05 (d) ......... 1,280,000 280,111 Republic of Italy, 1.80%, 02/23/10.............JPY 432,000 3,739,428 ---------- TOTAL ITALY .................... 4,019,539 ---------- JAPAN--2.4% Export-Import Bank of Japan, 4.375%, 10/01/03 (e) .......... 94,000 825,996 Spires, Ltd., 2.48%, 01/23/02 ............... 117,989 950,837 ---------- TOTAL JAPAN .................... 1,776,833 ---------- LUXEMBOURG--0.6% Ispat Europe Group SA, 11.875%, 02/01/11 ..........EUR 30 24,661 PTC International Finance II SA, 11.25%, 12/01/09 ...........EUR 280 242,254 Scandinavian Broadcasting SA, 12.00%, 06/15/08 (c) .......EUR 185 153,642 ---------- TOTAL LUXEMBOURG ............... 420,557 ---------- MEXICO--0.4% Mexican Bonos: 14.00%, 01/22/04 .............. 459 52,490 16.00%, 01/23/03 .............. 545 63,101 United Mexican States, 9.875%, 01/15/07 ...........USD 165 180,477 ---------- TOTAL MEXICO ................... 296,068 ---------- NAMIBIA--0.1% Government of Namibia: 12.00%, 04/15/02 .............. 210 26,419 12.00%, 04/15/05 .............. 210 26,910 ---------- TOTAL NAMIBIA .................. 53,329 ---------- NETHERLANDS--2.6% Completel Europe NV, Series B, 14.00%, 04/15/10 ...........EUR 245 91,355 Jones Lang LaSalle Finance BV, 9.00%, 06/15/07 ............EUR 115 104,035 Kappa Beheer BV, 0.00%, 07/15/09 (f) ........EUR 15 9,693 KPN NV: 6.05%, 06/13/03 ............EUR 420 353,722 7.25%, 04/12/06 ............EUR 880 754,630 KPNQwest BV: 7.125%, 06/01/09 ...........EUR 50 25,360 8.875%, 02/01/08 (c) .......EUR 165 90,190 United Pan-Europe Communications NV, Series B: 0.00%, 11/01/09 (f) ........EUR 470 67,711 11.25%, 02/01/10 ...........EUR 220 68,982 Versatel Telecom NV, 11.875%, 07/15/09 ..........EUR 115 37,521 Wolters Kluwer NV, 5.50%, 09/22/06 ............EUR 420 357,777 ---------- TOTAL NETHERLANDS .............. 1,960,976 ---------- NEW ZEALAND--2.3% Government of New Zealand, 8.00%, 11/15/06 ............... 4,000 1,719,173 ---------- PANAMA--0.1% Republic of Panama, 6.4375%, 07/17/16 (d) ......USD 149 120,366 ---------- POLAND--0.2% Government of Poland, 0.00%, 04/21/03 (l) ........... 663 128,544 ---------- SOUTH AFRICA--0.4% Lesotho Highlands Water: 12.00%, 12/01/05 .............. 740 96,011 12.50%, 04/15/02 .............. 870 110,055 13.00%, 09/15/10 .............. 430 59,041 South African Roads Board, 11.50%, 09/30/05 .............. 270 34,123 ---------- TOTAL SOUTH AFRICA ............. 299,230 ---------- SPAIN--0.5% Generalitat de Catalunya, 9.30%, 11/24/03 ............EUR 402 375,277 ---------- SUPRANATIONAL--17.1% European Investment Bank, 3.00%, 09/20/06 ............JPY 510,000 4,647,703 THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS. 40 ================================================================================ THE LAZARD FUNDS, INC. PORTFOLIOS OF INVESTMENTS (CONTINUED) JUNE 30, 2001 (UNAUDITED) -------------------------------------------------------------------------------- PRINCIPAL AMOUNT DESCRIPTION (000) (g) VALUE -------------------------------------------------------------------------------- LAZARD INTERNATIONAL FIXED-INCOME PORTFOLIO (CONTINUED) Inter-American Development Bank, 1.90%, 07/08/09 ...............JPY 355,000 $3,098,321 International Bank for Reconstruction and Development: 2.00%, 02/18/08 (e) ...........JPY 174,000 1,529,249 4.75%, 12/20/04 ...............JPY 376,000 3,490,484 ---------- TOTAL SUPRANATIONAL ............... 12,765,757 ---------- SWEDEN--2.4% AB Spintab, 7.50%, 06/15/04 .................. 8,600 834,106 Preem Holdings AB, 10.625%, 03/31/11 (c) .........EUR 180 160,549 Stadshypotek AB, 3.50%, 09/15/04 .................. 9,000 780,806 ---------- TOTAL SWEDEN ...................... 1,775,461 ---------- UNITED KINGDOM--10.6% Avecia Group PLC, 11.00%, 07/01/09 ..............USD 190 189,050 BAE Systems PLC, 7.45%, 11/29/03 (e) .............. 240 342,109 Birmingham Midshires Building Society, 9.125%, 01/05/06 (e) ............ 300 464,760 British Sky Broadcasting Group PLC, 7.75%, 07/09/09 .................. 115 152,658 British Telecommunications PLC, 6.125%, 02/15/06 (e) ..........EUR 1,290 1,109,439 Coca-Cola Enterprises PLC, 6.75%, 03/12/08 .................. 158 224,981 Coral Group Holdings PLC, Series B, 13.50%, 09/30/09 ................. 69 91,855 Diamond Cable Communications PLC, 11.75%, 12/15/05 (f) ..........USD 30 19,800 Diamond Holdings PLC, 10.00%, 02/01/08 (e) ............. 60 54,290 Energis PLC, 9.50%, 06/15/09 .................. 250 315,987 Gala Group Holdings PLC, 12.00%, 06/01/10 ................. 55 85,086 Imperial Tobacco Finance PLC, 6.375%, 09/27/06 ..............EUR 410 354,925 IPC Magazines Group PLC: 0.00%, 03/15/08 (f) .............. 65 68,151 9.625%, 03/15/08 ................. 30 39,292 Jazztel PLC, 14.00%, 07/15/10 ..............EUR 65 20,381 Luxfer Holdings PLC, 10.125%, 05/01/09 ................ 110 159,560 Ono Finance PLC, 14.00%, 02/15/11 (c) ..........EUR 305 217,117 Premier International Foods PLC, 12.25%, 09/01/09 ................. 60 86,188 Regional Independent Media: 0.00%, 07/01/08 (f) .............. 120 133,507 10.50%, 07/01/08 ..............USD 170 171,912 Telewest Communications PLC: 0.00%, 04/15/09 (f) .............. 25 16,284 9.875%, 02/01/10 ................. 125 142,150 TM Group Holdings PLC, 11.00%, 05/15/08 ..............USD 235 234,412 United Kingdom Treasury, 7.50%, 12/07/06 (e) .............. 1,880 2,892,507 West Coast Train Finance, 6.00%, 03/31/15 .................. 230 303,325 ---------- TOTAL UNITED KINGDOM .............. 7,889,726 ---------- UNITED STATES--15.2% AES Corp., 8.375%, 03/01/11 ..............GBP 10 14,127 Airtouch Communications Corp., 5.50%, 07/24/08 (c), (e) ......DEM 600 251,423 Baxter International, Inc., 5.75%, 03/06/06 (e) ...........EUR 1,320 1,133,400 Citibank Credit Card Master Trust, 5.75%, 07/16/07 (e) ...........DEM 1,250 552,856 Citicorp, 6.25%, 09/19/09 (e) ...........DEM 1,020 448,231 Corning, Inc., 5.625%, 02/18/05 (c) ..........EUR 140 115,796 Countrywide Home Loan, Inc., 5.25%, 12/15/05 (e) ...........DEM 800 340,933 Fannie Mae, 2.125%, 10/09/07 ..............JPY 140,000 1,231,497 Ford Motor Credit Co.: 5.25%, 06/16/08 ...............DEM 572 237,459 5.625%, 02/02/04 (e) ..........EUR 880 754,817 Fresenius Medical Capital Trust, 7.375%, 06/15/11 (c) ..........EUR 205 170,687 General Motors Acceptance Corp. Swift Trust, Series 1999-1, 5.00%, 01/18/05 (c) ...........EUR 370 315,046 HCA-The Healthcare Co., 8.75%, 11/01/10 ...............GBP 55 82,491 Household Finance Corp., 6.25%, 04/30/07 ...............FRF 2,200 293,712 THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS. 41 ================================================================================ THE LAZARD FUNDS, INC. PORTFOLIOS OF INVESTMENTS (CONTINUED) JUNE 30, 2001 (UNAUDITED) -------------------------------------------------------------------------------- PRINCIPAL AMOUNT DESCRIPTION (000) (g) VALUE -------------------------------------------------------------------------------- LAZARD INTERNATIONAL FIXED-INCOME PORTFOLIO (CONTINUED) Huntsman Corp., 9.50%, 07/01/07 (c) ................. 120 $ 66,000 International Business Machines Corp., 0.90%, 04/14/03 ..................JPY 72,000 583,979 MBNA American Europe, 6.00%, 05/21/07 (e) ..............NLG 3,800 1,510,245 Merrill Lynch & Co., Inc.: 5.375%, 01/04/09 (e) .............DEM 830 347,047 7.375%, 12/17/07 .................GBP 231 341,355 NTL Communications Corp., 12.375%, 02/01/08 (c) ............EUR 90 54,533 Pfizer, Inc., 0.80%, 03/18/08 ..................JPY 193,000 1,557,650 Resolution Funding Corp. STRIP Principal, 0.00%, 01/15/21 (l) ................. 824 238,185 Sola International, Inc., 11.00%, 03/15/08 (c) .............EUR 190 167,626 The Manitowoc Co., Inc., 10.375%, 05/15/11 (c) ............EUR 285 243,938 WorldCom, Inc., 6.75%, 05/15/08 ..................EUR 300 253,015 ---------- TOTAL UNITED STATES .................. 11,306,048 ---------- TOTAL CURRENCY DENOMINATED BONDS (Identified cost $76,764,295)......... 70,375,787 ---------- SHARES ------ PREFERRED STOCK--0.0% UNITED KINGDOM--0.0% Avecia Group PLC (a) (Identified cost $10,208)............. 408 12,240 ---------- WARRANTS--0.0% MEXICO--0.0% United Mexican States, Rights, 06/30/03 (a) ........................ 1,000 9 ---------- NORWAY--0.0% Enitel ASA, 04/03/05 (a) ........................ 65 1 ---------- TOTAL WARRANTS (Identified cost $607)................ 10 ---------- PRINCIPAL AMOUNT (000) --------- DISCOUNT NOTES--7.5% Federal Farm Credit Bank, 4.45%, 07/10/01 ..................... $100 $ 99,889 Federal Home Loan Bank: 3.53%, 08/08/01 ..................... 157 156,415 3.53%, 08/22/01 ..................... 230 228,827 3.67%, 07/18/01 ..................... 400 399,307 3.67%, 07/27/01 ..................... 150 149,618 3.70%, 08/13/01 ..................... 165 164,271 3.70%, 12/07/01 ..................... 150 147,595 3.74%, 08/15/01 ..................... 318 316,513 3.80%, 08/21/01 ..................... 150 149,193 3.98%, 04/18/02 ..................... 183 177,113 4.05%, 07/30/01 ..................... 114 113,628 4.46%, 07/06/01 ..................... 197 196,878 4.47%, 07/17/01 ..................... 111 110,779 4.54%, 07/03/01 ..................... 100 99,975 4.56%, 02/27/02 ..................... 100 96,947 Federal Home Loan Mortgage Corp.: 3.785%, 08/16/01 .................... 185 184,105 3.79%, 07/31/01 ..................... 100 99,684 3.80%, 07/17/01 ..................... 150 149,747 4.45%, 12/12/01 ..................... 100 97,973 Federal National Mortgage Association: 3.48%, 09/20/01 ..................... 132 130,979 3.56%, 07/25/01 ..................... 207 206,509 3.61%, 08/28/01 ..................... 350 348,000 3.65%, 07/20/01 ..................... 124 123,761 3.67%, 09/13/01 ..................... 65 64,510 3.70%, 09/07/01 ..................... 117 116,182 3.71%, 08/07/01 ..................... 200 199,238 3.71%, 08/13/01 ..................... 140 139,369 3.81%, 07/17/01 ..................... 100 99,831 3.88%, 07/10/01 ..................... 280 279,728 4.41%, 03/08/02 ..................... 110 106,631 4.54%, 07/05/01 ..................... 142 141,928 5.45%, 12/14/01 ..................... 260 253,466 6.33%, 07/27/01 ..................... 117 116,465 6.42%, 07/11/01 ..................... 117 116,791 --------- TOTAL DISCOUNT NOTES (Identified cost $5,581,845)......... 5,581,845 --------- THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS. 42 ================================================================================ THE LAZARD FUNDS, INC. PORTFOLIOS OF INVESTMENTS (CONTINUED) JUNE 30, 2001 (UNAUDITED) --------------------------------------------------------------------------------
PRINCIPAL AMOUNT DESCRIPTION (000) VALUE --------------------------------------- ----------- -------------- LAZARD INTERNATIONAL FIXED-INCOME PORTFOLIO (CONTINUED) REPURCHASE AGREEMENT--0.2% State Street Corp., 3.88%, 07/02/01, (Dated 06/29/01, collateralized by $170,000 United States Treasury Note, 6.00%, 08/15/09, with a value of $181,475) (e) (Identified cost $173,000)........... $173 $ 173,000 ----------- TOTAL INVESTMENTS (Identified cost $82,529,955) (b)......... 102.1% $76,142,882 LIABILITIES IN EXCESS OF CASH AND OTHER ASSETS ............................. ( 2.1) (1,596,136) ----- ----------- NET ASSETS ................................ 100.0% $74,546,746 ====== ============
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS. 43 ================================================================================ THE LAZARD FUNDS, INC. PORTFOLIOS OF INVESTMENTS (CONTINUED) JUNE 30, 2001 (UNAUDITED) -------------------------------------------------------------------------------- LAZARD INTERNATIONAL FIXED-INCOME PORTFOLIO (CONTINUED) Forward Foreign Currency Contracts open at June 30, 2001:
Forward U.S. $ Cost U.S. $ Foreign Currency Expiration Foreign on Origination Current Unrealized Unrealized Purchase Contracts Date Currency Date Value Appreciation Depreciation -------------------- ------------ -------------- ---------------- ------------ -------------- ------------- ARS 7/5/01 239,263 $ 239,000 $ 238,167 $ -- $ 833 ARS 7/10/01 93,339 93,000 92,608 -- 392 ARS 7/10/01 26,156 26,000 25,951 -- 49 ARS 10/19/01 63,040 59,867 58,435 -- 1,432 AUD 7/26/01 537,158 271,802 273,750 1,948 -- AUD 7/26/01 26,123 13,819 13,313 -- 506 BRL 7/31/01 121,788 51,000 52,060 1,060 -- BRL 12/5/01 238,539 111,000 96,731 -- 14,269 CAD 7/26/01 1,600,373 1,036,625 1,054,027 17,402 -- CAD 7/26/01 42,537 27,523 28,016 493 -- CAD 7/26/01 1,539,821 995,713 1,014,146 18,433 -- CHF 7/26/01 1,060,352 623,949 590,491 -- 33,458 CLP 8/14/01 45,440,000 80,000 72,090 -- 7,910 CLP 9/28/01 78,071,000 133,000 123,374 -- 9,626 CLP 10/4/01 80,419,000 137,000 126,984 -- 10,016 CLP 12/12/01 32,312,500 55,000 50,245 -- 4,755 CLP 12/13/01 44,697,899 74,558 69,947 -- 4,611 CLP 2/27/02 82,220,400 138,000 128,649 -- 9,351 CNY 7/11/01 830,850 100,000 100,361 361 -- CNY 7/16/01 265,187 32,000 32,030 30 -- CNY 7/31/01 946,417 114,000 114,274 274 -- CNY 8/21/01 1,243,830 150,000 150,076 76 -- CNY 9/5/01 199,049 24,000 24,004 4 -- COP 8/14/01 96,452,500 41,000 41,297 297 -- COP 8/28/01 129,360,000 55,000 55,121 121 -- COP 8/29/01 185,571,000 79,000 79,046 46 -- COP 8/30/01 114,768,000 48,000 48,871 871 -- COP 8/31/01 306,716,850 131,000 130,568 -- 432 CRC 8/22/01 42,438,400 128,000 126,636 -- 1,364 CZK 7/9/01 2,143,620 55,039 53,639 -- 1,400 CZK 7/11/01 3,020,841 77,241 75,584 -- 1,657 CZK 7/17/01 4,395,000 116,919 109,943 -- 6,976 CZK 7/17/01 4,341,400 110,684 108,602 -- 2,082 CZK 8/7/01 1,903,059 47,569 47,570 1 -- CZK 8/13/01 6,719,079 167,709 167,919 210 -- CZK 8/13/01 1,480,000 36,933 36,987 54 -- DKK 7/26/01 5,470,860 657,137 622,144 -- 34,993 DKK 7/26/01 669,054 76,909 76,085 -- 824 EUR 7/26/01 470,659 419,357 398,659 -- 20,698 EUR 7/26/01 175,844 158,787 148,944 -- 9,843 EUR 7/26/01 60,728 54,777 51,438 -- 3,339 EUR 7/26/01 7,492,524 6,719,071 6,346,335 -- 372,736 EUR 7/26/01 7,870,623 7,050,661 6,666,592 -- 384,069 EUR 7/26/01 102,764 92,161 87,043 -- 5,118 EUR 7/26/01 30,383 27,127 25,735 -- 1,392 EUR 7/26/01 33,573 30,058 28,437 -- 1,621 EUR 7/26/01 223,245 198,684 189,093 -- 9,591 EUR 7/26/01 851,386 758,585 721,143 -- 37,442
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS. 44 ================================================================================ THE LAZARD FUNDS, INC. PORTFOLIOS OF INVESTMENTS (CONTINUED) JUNE 30, 2001 (UNAUDITED) ================================================================================ LAZARD INTERNATIONAL FIXED-INCOME PORTFOLIO (CONTINUED)
Forward U.S. $ Cost U.S. $ Foreign Currency Expiration Foreign on Origination Current Unrealized Unrealized Purchase Contracts Date Currency Date Value Appreciation Depreciation -------------------- ------------ -------------- ---------------- ------------ -------------- ------------- EUR 7/26/01 26,867 $ 24,000 $ 22,757 $ -- $ 1,243 EUR 7/26/01 46,984 41,158 39,797 -- 1,361 EUR 7/26/01 3,251 2,753 2,753 -- -- EUR 7/26/01 17,405 14,722 14,743 21 -- EUR 7/26/01 22,342 19,000 18,925 -- 75 EUR 7/26/01 22,125 18,842 18,741 -- 101 EUR 7/26/01 59,472 51,146 50,374 -- 772 EUR 7/26/01 223,665 191,233 189,449 -- 1,784 EUR 7/26/01 703,036 606,720 595,487 -- 11,233 EUR 7/26/01 147,741 127,205 125,140 -- 2,065 EUR 7/26/01 101,335 86,000 85,833 -- 167 EUR 6/10/02 2,080,000 1,772,056 1,760,201 -- 11,855 GBP 7/26/01 15,153 21,740 21,319 -- 421 GBP 7/26/01 25,622 36,838 36,049 -- 789 GBP 7/26/01 263,481 377,489 370,699 -- 6,790 HUF 8/6/01 33,656,220 117,000 116,277 -- 723 ILS 7/10/01 83,000 19,938 19,872 -- 66 ILS 7/20/01 418,350 100,000 100,072 72 -- ILS 8/28/01 192,516 45,815 45,894 79 -- INR 7/5/01 3,719,040 78,000 78,729 729 -- INR 7/10/01 3,051,520 64,000 64,562 562 -- INR 7/18/01 1,703,520 36,000 36,019 19 -- INR 7/20/01 5,387,640 114,000 113,898 -- 102 JPY 7/26/01 215,721,205 1,794,089 1,734,860 -- 59,229 JPY 7/26/01 26,559,799 220,560 213,598 -- 6,962 JPY 7/26/01 9,734,327 80,736 78,285 -- 2,451 JPY 7/26/01 3,021,125 25,000 24,296 -- 704 JPY 7/26/01 15,302,935 125,847 123,068 -- 2,779 JPY 7/26/01 56,864,640 480,000 457,313 -- 22,687 JPY 7/26/01 130,171,129 1,082,054 1,046,854 -- 35,200 JPY 7/26/01 1,682,800 14,070 13,533 -- 537 KES 7/18/01 5,063,552 64,000 63,502 -- 498 KES 7/25/01 2,842,430 36,000 35,592 -- 408 KES 8/13/01 2,062,645 26,000 25,712 -- 288 KRW 7/23/01 59,892,000 46,000 45,836 -- 164 KRW 7/23/01 162,130,000 124,000 124,080 80 -- KRW 8/14/01 49,799,000 38,000 38,051 51 -- MXN 8/27/01 227,524 22,000 24,721 2,721 -- MXN 11/16/01 837,000 86,422 89,211 2,789 -- MXN 12/19/01 1,868,850 180,000 197,720 17,720 -- MXN 3/12/02 1,166,766 108,222 121,019 12,797 -- MXN 4/18/02 1,900,000 183,309 195,415 12,106 -- MXN 6/11/02 370,000 37,091 37,590 499 -- NZD 7/26/01 159,560 65,000 65,000 -- -- PEN 9/7/01 423,189 117,000 118,660 1,660 -- PEN 9/13/01 154,456 43,000 43,241 241 -- PEN 9/28/01 472,626 132,000 131,798 -- 202 PHP 7/3/01 3,879,800 76,000 73,607 -- 2,393
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS. 45 -------------------------------------------------------------------------------- THE LAZARD FUNDS, INC. PORTFOLIOS OF INVESTMENTS (CONTINUED) JUNE 30, 2001 (UNAUDITED) ================================================================================ LAZARD INTERNATIONAL FIXED-INCOME PORTFOLIO (CONTINUED)
Forward U.S. $ Cost U.S. $ Foreign Currency Expiration Foreign on Origination Current Unrealized Unrealized Purchase Contracts Date Currency Date Value Appreciation Depreciation -------------------- ------------ -------------- ---------------- -------------- -------------- ------------- PHP 7/10/01 4,763,850 $ 91,000 $ 90,219 $ -- $ 781 PHP 7/10/01 5,029,450 97,000 95,249 -- 1,751 PHP 9/4/01 1,487,700 29,000 27,757 -- 1,243 PHP 12/11/01 2,217,600 42,000 40,482 -- 1,518 PLN 10/3/01 674,576 133,000 163,249 30,249 -- PLN 11/20/01 1,505,874 293,000 359,275 66,275 -- PLN 12/7/01 654,720 132,000 155,427 23,427 -- PLN 2/5/02 172,000 38,057 40,178 2,121 -- RUB 7/3/01 1,172,496 40,000 40,173 173 -- RUB 7/13/01 1,464,355 50,000 50,074 74 -- RUB 7/17/01 1,825,900 62,000 62,336 336 -- RUB 7/19/01 1,464,100 50,000 49,944 -- 56 RUB 7/23/01 879,591 30,000 29,957 -- 43 RUB 8/1/01 5,431,989 185,000 184,360 -- 640 SEK 7/26/01 5,754,100 563,575 529,041 -- 34,534 SKK 7/11/01 927,624 18,816 18,590 -- 226 SKK 7/23/01 1,907,138 38,449 38,171 -- 278 SKK 8/8/01 5,006,212 98,545 100,024 1,479 -- SKK 8/13/01 864,600 17,098 17,265 167 -- SKK 8/14/01 6,931,037 136,679 138,390 1,711 -- SKK 8/27/01 4,875,000 97,386 97,198 -- 188 SKK 12/18/01 3,920,375 79,000 77,267 -- 1,733 SKK 12/21/01 2,333,760 46,900 45,983 -- 917 SKK 12/27/01 3,590,000 72,876 70,693 -- 2,183 TWD 7/20/01 2,120,000 64,000 61,114 -- 2,886 TWD 8/21/01 2,848,578 86,000 81,766 -- 4,234 UYU 8/8/01 1,134,665 85,000 82,099 -- 2,901 VEB 7/6/01 11,568,000 16,000 16,054 54 -- VEB 7/9/01 77,922,000 108,000 108,025 25 -- VEB 7/16/01 28,314,000 39,000 39,154 154 -- VEB 7/25/01 35,476,000 49,000 48,901 -- 99 VEB 7/26/01 114,431,500 158,000 157,680 -- 320 VEB 8/8/01 114,037,100 157,184 156,389 -- 795 VEB 8/22/01 45,182,500 62,000 61,642 -- 358 VEB 8/29/01 28,551,900 39,000 38,852 -- 148 ZAR 12/7/01 1,246,500 150,000 150,735 735 -- ----------- ----------- -------- ---------- Total Forward Foreign Currency Purchase Contracts $34,550,884 $33,547,025 $220,807 $1,224,666 =========== =========== -------- ----------
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS. 46 -------------------------------------------------------------------------------- THE LAZARD FUNDS, INC. PORTFOLIOS OF INVESTMENTS (CONTINUED) JUNE 30, 2001 (UNAUDITED) ================================================================================ LAZARD INTERNATIONAL FIXED-INCOME PORTFOLIO (CONTINUED)
Forward U.S. $ Cost U.S. $ Foreign Currency Expiration Foreign on Origination Current Unrealized Unrealized Sale Contracts Date Currency Date Value Appreciation Depreciation ------------------ ------------ ------------ ---------------- ------------ -------------- ------------- ARS 10/19/01 63,040 $ 59,248 $ 58,435 $ 813 $ -- AUD 7/26/01 177,270 90,000 90,342 -- 342 BRL 7/31/01 105,336 42,000 45,027 -- 3,027 BRL 10/16/01 336,740 149,000 139,235 9,765 -- BRL 12/5/01 238,539 110,129 96,731 13,398 -- BRL 12/6/01 231,660 90,000 93,907 -- 3,907 BRL 12/26/01 100,230 39,000 40,337 -- 1,337 BRL 2/8/02 282,576 116,000 111,699 4,301 -- BRL 2/8/02 107,933 41,000 42,664 -- 1,664 CAD 7/26/01 138,204 90,000 91,023 -- 1,023 CAD 7/26/01 2,758,767 1,822,677 1,816,960 5,717 -- CHF 7/26/01 98,001 57,617 54,575 3,042 -- CHF 7/26/01 17,922 10,000 9,980 20 -- CLP 8/14/01 45,440,000 74,737 72,090 2,647 -- CLP 9/28/01 43,950,750 72,080 69,454 2,626 -- CLP 9/28/01 34,120,250 55,593 53,919 1,674 -- CLP 10/4/01 61,512,000 100,000 97,130 2,870 -- CLP 10/4/01 18,907,000 30,693 29,855 838 -- CLP 12/12/01 43,491,000 70,000 68,059 1,941 -- CLP 12/13/01 36,671,450 59,000 57,379 1,621 -- DKK 7/26/01 6,999,115 834,549 795,937 38,612 -- DKK 7/26/01 21,766,356 2,613,949 2,475,261 138,688 -- DKK 7/26/01 1,231,755 147,735 140,075 7,660 -- DKK 7/26/01 528,318 60,000 60,080 -- 80 DKK 7/26/01 9,842,068 1,139,267 1,119,236 20,031 -- EUR 7/9/01 61,902 55,039 52,449 2,590 -- EUR 7/11/01 21,352 18,816 18,090 726 -- EUR 7/11/01 87,707 77,241 74,310 2,931 -- EUR 7/17/01 125,000 110,684 105,896 4,788 -- EUR 7/23/01 43,848 38,449 37,143 1,306 -- EUR 7/26/01 73,102 65,280 61,919 3,361 -- EUR 7/26/01 5,540 4,963 4,692 271 -- EUR 7/26/01 368,262 330,349 311,926 18,423 -- EUR 7/26/01 2,011 1,802 1,703 99 -- EUR 7/26/01 1,409,291 1,253,283 1,193,701 59,582 -- EUR 7/26/01 27,029 24,000 22,894 1,106 -- EUR 7/26/01 304,238 271,806 257,696 14,110 -- EUR 7/26/01 75,000 67,005 63,527 3,478 -- EUR 7/26/01 299,757 263,786 253,901 9,885 -- EUR 7/26/01 31,988 28,000 27,095 905 -- EUR 7/26/01 187,503 165,753 158,819 6,934 -- EUR 7/26/01 130,974 115,257 110,937 4,320 -- EUR 7/26/01 26,400 23,232 22,361 871 -- EUR 7/26/01 45,096 39,639 38,197 1,442 -- EUR 7/26/01 55,125 47,187 46,692 495 -- EUR 7/26/01 85,317 73,219 72,266 953 -- EUR 7/26/01 16,466 14,113 13,947 166 -- EUR 7/26/01 315,000 266,396 266,812 -- 416 EUR 7/26/01 70,738 60,000 59,917 83 --
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS. 47 -------------------------------------------------------------------------------- THE LAZARD FUNDS, INC. PORTFOLIOS OF INVESTMENTS (CONTINUED) JUNE 30, 2001 (UNAUDITED) ================================================================================ LAZARD INTERNATIONAL FIXED-INCOME PORTFOLIO (CONCLUDED)
Forward U.S. $ Cost U.S. $ Foreign Currency Expiration Foreign on Origination Current Unrealized Unrealized Sale Contracts Date Currency Date Value Appreciation Depreciation ------------------ ------------ ------------ ---------------- -------------- -------------- ------------- EUR 7/26/01 77,090 $ 65,363 $ 65,297 $ 66 $ -- EUR 7/26/01 185,000 155,842 156,699 -- 857 EUR 7/26/01 439,326 370,000 372,119 -- 2,119 EUR 7/26/01 203,208 174,962 172,122 2,840 -- EUR 7/26/01 1,568 1,341 1,328 13 -- EUR 7/26/01 352,175 299,000 298,300 700 -- EUR 8/7/01 56,000 47,569 47,423 146 -- EUR 8/8/01 116,000 98,545 98,233 312 -- EUR 8/13/01 20,000 17,098 16,935 163 -- EUR 8/13/01 197,000 167,709 166,813 896 -- EUR 8/13/01 43,345 36,933 36,703 230 -- EUR 8/14/01 160,366 136,679 135,790 889 -- EUR 8/27/01 113,430 97,386 96,026 1,360 -- EUR 12/18/01 88,150 79,000 74,530 4,470 -- EUR 12/21/01 52,000 46,900 43,964 2,936 -- EUR 12/27/01 79,566 72,876 67,266 5,610 -- GBP 7/26/01 837,402 1,203,138 1,178,164 24,974 -- GBP 7/26/01 965,953 1,387,330 1,359,025 28,305 -- GBP 7/26/01 2,046,271 2,937,892 2,878,954 58,938 -- GBP 7/26/01 86,239 123,589 121,332 2,257 -- GBP 7/26/01 267,885 380,000 376,895 3,105 -- GBP 7/26/01 15,705 22,133 22,096 37 -- GBP 7/26/01 15,135 21,400 21,294 106 -- GBP 7/26/01 2,028 2,871 2,853 18 -- HUF 8/6/01 33,656,220 113,792 116,277 -- 2,485 JPY 7/26/01 70,710,734 588,153 568,665 19,488 -- JPY 7/26/01 2,046,450 17,103 16,458 645 -- JPY 7/26/01 54,527,934 438,000 438,521 -- 521 MXN 8/16/01 837,000 88,830 91,182 -- 2,352 MXN 8/27/01 227,524 23,465 24,721 -- 1,256 MXN 6/11/02 160,512 16,271 16,307 -- 36 NZD 6/10/02 4,295,000 1,748,065 1,712,045 36,020 -- PLN 10/3/01 199,005 46,147 48,160 -- 2,013 PLN 11/20/01 1,217,242 292,185 290,413 1,772 -- SEK 7/26/01 2,903,664 285,257 266,968 18,289 -- SEK 7/26/01 5,278,238 518,083 485,290 32,793 -- SEK 7/26/01 6,376,794 625,164 586,293 38,871 -- SEK 7/26/01 608,045 56,000 55,905 95 -- TWD 7/20/01 2,120,000 61,943 61,114 829 -- TWD 8/21/01 2,848,578 82,988 81,766 1,222 -- VEB 7/6/01 11,568,000 16,100 16,054 46 -- ----------- ----------- -------- ---------- Total Forward Foreign Currency Sale $24,352,675 $23,692,580 $683,530 $ 23,435 Contracts =========== =========== -------- ---------- Gross unrealized appreciation/depreciation from Forward Foreign Currency Contracts $904,337 $1,248,101 ======== ==========
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS. 48 ================================================================================ THE LAZARD FUNDS, INC. PORTFOLIOS OF INVESTMENTS (CONTINUED) JUNE 30, 2001 (UNAUDITED) -------------------------------------------------------------------------------- PRINCIPAL AMOUNT DESCRIPTION (000) (g) VALUE -------------------------------------------------------------------------------- LAZARD STRATEGIC YIELD PORTFOLIO CURRENCY DENOMINATED BONDS--65.5% AUSTRALIA--0.4% Western Capital, Ltd., 9.44%, 01/07/03 (c), (d), (e) .......... ..USD 1,000 $ 995,000 ---------- BERMUDA--0.4% Gold Eagle Capital 2001, Ltd., Series A, 10.3374%, 04/08/02 (c), (d) ...............USD 870 870,000 ---------- BRAZIL--2.3% Deutsche Bank LTN Linked Notes: 15.20%, 02/08/02 (e), (h) .................USD 3,116 2,703,286 17.18%, 08/01/01 (h) ......................USD 940 842,616 17.40%, 08/01/01 (h) ......................USD 430 386,957 Salomon, Inc. Linked Brazil Inflation Index Notes: LTN, 14.90%, 12/06/01 (c), (h) .................USD 677 610,654 NTN, 6.00%, 12/02/02 (c), (e), (h) .............USD 895 767,910 ---------- TOTAL BRAZIL .................................. 5,311,423 ---------- CANADA--1.5% Ainsworth Lumber Co. Ltd., 12.50%, 07/15/07 ..........................USD 400 368,000 Argos Funding Trust, 5.9625%, 02/27/06 (c), (e) .................... 1,000 612,810 Calpine Canada Energy Finance, 8.50%, 05/01/08 .......................... USD 575 560,601 Dynacare, Inc., 10.75%, 01/15/06 (e) ......................USD 1,290 1,309,350 GT Group Telecom, Inc., 0.00%, 02/01/10 (f) .......................USD 775 244,125 Quebecor Media, Inc., 11.125%, 07/15/11 (c) .....................USD 340 337,025 ---------- TOTAL CANADA ................................... 3,431,911 ---------- COSTA RICA--0.5% Costa Rica Treasury Bill (B.E.M.), 0.00%, 07/10/01 (e), (h) ..................... 290,000 879,458 Salomon, Inc. CRC Linked Unsecured Notes: 13.00%, 07/12/01 (c), (h) .................USD 335 335,704 13.00%, 07/19/01 (c), (h) .................USD 63 63,428 ---------- TOTAL COSTA RICA ........................... 1,278,590 ---------- DENMARK--1.1% Nykredit, 6.00%, 10/01/29 (e) .......................... 12,363 $1,342,485 Unikredit Realkredit, 7.00%, 07/01/29 (e) .......................... 9,704 1,107,876 ---------- TOTAL DENMARK ................................. 2,450,361 ---------- GERMANY--1.2% Callahan Nordrhein Westfalen, 14.125%, 07/15/11 (c) .................... EUR 510 363,047 Core, Series 1998-1A, Class B3, 7.3377%, 01/16/06 (c), (d), (e) .......... EUR 2,400 1,053,394 European Credit Card Offerings, Series B, 5.50%, 06/18/08 (e) .......................... 2,570 1,102,486 Messer Griesheim Holding AG, 10.375%, 06/01/11 (c) .................... EUR 195 170,210 ---------- TOTAL GERMANY ................................. 2,689,137 ---------- GREECE--0.0% Republic of Hellenic, 7.72%, 08/14/03 (d) ...................... EUR 0.2 171 ---------- HUNGARY--2.7% Government of Hungary: 9.00%, 11/24/02 .............................. 115,910 400,693 9.50%, 01/12/02 (e) ........................... 1,186,920 4,108,816 9.50%, 06/12/02 .............................. 193,300 667,944 9.50%, 06/12/03 .............................. 14,220 49,863 10.00%, 04/12/03 ......................... .... 185,200 651,496 12.50%, 09/24/02 ......................... ... 84,940 302,853 ---------- TOTAL HUNGARY ................................. 6,181,665 ---------- INDONESIA--0.0% Polysindo, 0.00%, 04/26/03 (a), (j) ...................... 5,000,000 4,390 PT Polysindo Eka Perkasa, 0.00%, 03/16/02 (a), (j) ................. USD 194 1,942 ---------- TOTAL INDONESIA ................................ 6,332 ---------- ITALY--0.4% Films PLC, 5.5488%, 03/31/05 (d), (e) ................... 4,160,000 910,362 ---------- JAPAN--1.0% Spires, Ltd., 2.48%, 01/23/02 (e) .......................... 286,282 2,307,060 ---------- THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS. 49 ================================================================================ THE LAZARD FUNDS, INC. PORTFOLIOS OF INVESTMENTS (CONTINUED) JUNE 30, 2001 (UNAUDITED) -------------------------------------------------------------------------------- PRINCIPAL AMOUNT DESCRIPTION (000) (G) VALUE -------------------------------------------------------------------------------- LAZARD STRATEGIC YIELD PORTFOLIO (CONTINUED) LUXEMBOURG--0.3% Ispat Europe Group SA, 11.875%, 02/01/11 ........................ EUR 50 $ 41,101 PTC International Finance II SA, 11.25%, 12/01/09 ......................... EUR 410 354,729 Scandinavian Broadcasting SA, 12.00%, 06/15/08 (c) ..................... EUR 280 232,540 ---------- TOTAL LUXEMBOURG .............................. 628,370 ---------- MEXICO--0.6% Mexico Bonos: 14.00%, 01/22/04 ............................. 4,795 548,340 16.00%, 01/23/03 ......................... ... 2,351 272,202 United Mexican States: 9.875%, 01/15/07 ......................... USD 160 175,008 Series D, 4.7875%, 12/31/19(d) ........... USD 450 445,500 ---------- TOTAL MEXICO .................................. 1,441,050 ---------- NAMIBIA--0.2% Government of Namibia: 12.00%, 04/15/02 ......................... .... 1,460 183,674 12.00%, 04/15/05 ......................... ... 1,460 187,089 ---------- TOTAL NAMIBIA ............................. ... 370,763 ---------- NETHERLANDS--0.4% Completel Europe NV, Series B, 14.00%, 04/15/10 ......................... EUR 240 89,491 Jones Lang LaSalle Finance BV, 9.00%, 06/15/07 .......................... EUR 170 153,791 Kappa Beheer BV, 0.00%, 07/15/09 (f) ...................... EUR 35 22,616 KPNQwest BV: 7.125%, 06/01/09 ......................... EUR 50 25,360 8.875%, 02/01/08 (c) ..................... EUR 255 139,384 United Pan Europe Communications NV, Series B: 0.00%, 08/01/09 (f) ...................... USD 1,190 261,800 0.00%, 11/01/09 (f) ...................... EUR 710 102,287 11.25%, 02/01/10 ......................... EUR 325 101,906 Versatel Telecom NV, 11.875%, 07/15/09 ........................ EUR 175 57,097 ---------- TOTAL NETHERLANDS .............................. 953,732 ---------- PANAMA--0.3% Republic of Panama, 6.4375%, 07/17/16 (d) .................... USD 814 656,179 ---------- POLAND--0.7% Government of Poland: 0.00%, 04/21/03 (e), (l) ...................... 3,520 $ 682,467 0.00%, 12/21/02 (l) ...................... .... 2,563 519,000 10.00%, 02/12/04 ............................. 1,709 384,898 ---------- TOTAL POLAND .................................. 1,586,365 ---------- RUSSIA--0.2% Salomon, Inc. RUB Linked Note, 12.00%, 07/27/01 (h) ......................USD 400 398,492 ---------- SOUTH AFRICA--1.8% Lesotho Highlands Water: 12.00%, 12/01/05 (e) ......................... 5,700 739,544 12.50%, 04/15/02 (e) ..................... .... 8,590 1,086,633 13.00%, 09/15/10 (e) ......................... 6,080 834,816 Republic of South Africa: 12.00%, 02/28/05 ............................. 1,710 222,131 12.50%, 12/21/06 (e) ......................... 9,000 1,196,065 South African Roads Board, 11.50%, 09/30/05 ......................... ... 415 52,449 ---------- TOTAL SOUTH AFRICA ........................ 4,131,638 ---------- SWEDEN--0.1% Preem Holdings AB, 10.625%, 03/31/11 (c) .....................EUR 285 254,203 ---------- THAILAND--0.0% Finance One PLC: 0.00%, 08/28/97 (a), (k) ................. ... 10,000 0 0.00%, 10/15/97 (a), (k) ................. ... 10,000 0 Morgan Guarantee Trust, 0.00%, 07/31/01 (a), (k) ................. ... 10,569 0 ---------- TOTAL THAILAND ............................ ... 0 ---------- UNITED KINGDOM--1.4% Avecia Group PLC, 11.00%, 07/01/09 (e) ..................... USD 290 288,550 British Sky Broadcasting Group PLC, 7.75%, 07/09/09 .......................... ... 170 225,669 Coral Group Holdings PLC, Series B, 13.50%, 09/30/09 (e) ......................... 69 91,855 Diamond Cable Communications PLC, 11.75%, 12/15/05 (f) ......................USD 85 56,100 Diamond Holdings PLC, 10.00%, 02/01/08 ............................. 65 58,814 Energis PLC, 9.50%, 06/15/09 .......................... .... 375 473,981 Gala Group Holdings PLC, 12.00%, 06/01/10 ......................... ... 57 88,180 THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS. 50 ================================================================================ THE LAZARD FUNDS, INC. PORTFOLIOS OF INVESTMENTS (CONTINUED) JUNE 30, 2001 (UNAUDITED) -------------------------------------------------------------------------------- PRINCIPAL AMOUNT DESCRIPTION (000) (g) VALUE -------------------------------------------------------------------------------- LAZARD STRATEGIC YIELD PORTFOLIO (CONTINUED) IPC Magazines Group PLC: 0.00%, 03/15/08 (f) ........................... 190 $ 199,211 9.625%, 03/15/08 ............................. 45 58,937 Jazztel PLC, 14.00%, 07/15/10 ......................... EUR 80 25,085 Luxfer Holdings PLC, 10.125%, 05/01/09 ............................ 110 159,560 Ono Finance PLC, 14.00%, 02/15/11 (c) ..................... EUR 540 384,403 Premier International Foods PLC, 12.25%, 09/01/09 ......................... .... 100 143,647 Regional Independent Media: 0.00%, 07/01/08 (f) ...................... .... 150 166,884 10.50%, 07/01/08 ......................... USD 125 126,406 Telewest Communications PLC, 0.00%, 04/15/09 (f) .......................... 190 216,068 TM Group Holdings PLC, 11.00%, 05/15/08 ......................... USD 355 354,112 ---------- TOTAL UNITED KINGDOM .......................... 3,117,462 ---------- UNITED STATES--47.9% Adelphia Communications Corp., 9.375%, 11/15/09 ............................. 247 235,885 Advanta Business Card Master Trust, Series 2000-B, Class C, 5.1313%, 01/20/06 (d), (e) ................... 2,280 2,283,396 Advanta Credit Card Master Trust, Series 1996-E, Class B, 4.31%, 05/15/04 (d) .......................... 1,515 1,514,515 AES Corp.: 8.375%, 03/01/11 ......................... GBP 15 21,191 9.375%, 09/15/10 (e) ..................... ... 990 999,900 Agrilink Foods, Inc., 11.875%, 11/01/08 ............................ 545 501,400 Alamosa Delaware, Inc., 12.50%, 02/01/11 (c), (e) ..................... 325 292,500 Alliance Imaging, Inc., 10.375%, 04/15/11 (c) ........................ 540 553,500 Allied Waste North America, Inc., Series B, 10.00%, 08/01/09 (e) .......................... 990 1,017,225 American Cellular Corp., 9.50%, 10/15/09 (c) .......................... 995 935,300 American Tower Corp., 9.375%, 02/01/09 (c), (e) .................... 610 568,825 Ameristar Casinos, Inc., 10.75%, 02/15/09 (c), (e) .................... 1,160 1,212,200 ARCO Chemical Co., 9.80%, 02/01/20 (e) ........................... 535 $ 545,573 Asset Securitization Corp., Series 1996-D2, Class ACS2, 1.4848%, 02/14/29 (d), (e), (i) .............. 7,035 408,945 Atrium Cos. Inc., Series B, 10.50%, 05/01/09 (e) .......................... 880 783,200 Banc of America Large Loan, Series 2000-WSFA, Class A, 4.5763%, 05/12/11 (c), (d), (e) ............... 735 732,942 Beazer Homes USA, Inc., 8.625%, 05/15/11 (e) .......................... 715 713,212 Building One Services Corp., 10.50%, 05/01/09 (e) ......................... 1,545 1,483,200 Capital One Master Trust: Series 2001-4, Class C, 4.86%, 04/16/07 (c) ........................... 3,300 3,301,914 Series 1998-4, Class A, 5.43%, 01/15/07 .............................. 4,940 4,988,025 Caraustar Industries, Inc., 9.875%, 04/01/11 (c) ......................... 350 322,000 Carco Auto Loan Master Trust, Series 1999-2, Class A1, 4.05%, 05/17/04 (d), (e) ..................... 1,360 1,360,000 Charter Communications Holdings LLC: 0.00%, 01/15/10 (f) ........................... 850 569,500 8.625%, 04/01/09 ......................... .... 210 197,400 Chase Credit Card Master Trust, Series 2000-2, Class C, 4.66%, 07/15/05 (d), (e) ..................... 4,925 4,907,926 Chesapeake Energy Corp., 8.125%, 04/01/11 (c), (e) ..................... 610 570,350 Citibank Credit Card Issuance Trust, Series 2001-C1, Class C1, 6.1025%, 01/15/10 (d), (e) ................... 4,700 4,685,712 Citibank Credit Card Master Trust I, Series 1999-1, Class A, 5.50%, 02/15/06 .............................. 2,465 2,485,310 Comstock Resources, Inc., 11.25%, 05/01/07 (e) .......................... 399 421,943 Corning, Inc., 5.625%, 02/18/05 (c), (e) .................EUR 680 562,435 Discover Card Master Trust I, Series 1998-7, Class A, 5.60%, 05/16/06 .............................. 4,940 4,987,819 Dura Operating Corp., 9.00%, 05/01/09 (c) ...................... ... 805 756,700 THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS. 51 ================================================================================ THE LAZARD FUNDS, INC. PORTFOLIOS OF INVESTMENTS (CONTINUED) JUNE 30, 2001 (UNAUDITED) -------------------------------------------------------------------------------- PRINCIPAL AMOUNT DESCRIPTION (000) (g) VALUE -------------------------------------------------------------------------------- LAZARD STRATEGIC YIELD PORTFOLIO (CONTINUED) Echostar Broadband Corp., 10.375%, 10/01/07 (e) ........................ 975 $ 975,000 Emmis Escrow Corp., 0.00%, 03/15/11 (c), (f) ..................... 1,065 601,725 Federal Home Loan Mortgage Corp., Series 30, Class J, 7.50%, 02/25/23 (i) .......................... 1,975 202,449 First USA Credit Card Master Trust: Series 1994-6, Class B, 4.58%, 10/15/03 (d) .......................... 3,295 3,303,384 Series 1998-1, Class C, 6.50%, 01/18/06 (c), (e) ..................... 1,600 1,629,264 Foamex L.P., 13.50%, 08/15/05 (e) ......................... 260 205,400 Ford Credit Auto Owner Trust, Series 2000-F, Class A4, 4.86%, 05/15/05 (d) .......................... 2,475 2,475,840 Fresenius Medical Capital Trust: 7.375%, 06/15/11 (c)...................... EUR 315 262,275 9.00%, 12/01/06 (e) .......................... 1,630 1,678,900 Golden Sky DBS, Inc., Series B, 0.00%, 03/01/07 (f) .......................... 440 268,400 GSI Group, Inc., 10.25%, 11/01/07 (e) ......................... 795 604,200 Halyard Re BV, 9.29%, 04/05/02 (c), (d) ..................... 250 250,373 HCA-The Healthcare Co., 8.75%, 11/01/10............................GBP 55 82,491 HEALTHSOUTH Corp., 10.75%, 10/01/08 (e) ......................... 605 656,425 Huntsman Corp., 9.50%, 07/01/07 (c) .......................... 185 101,750 Hyperion Telecommunications, Inc., 12.00%, 11/01/07 (e) ......................... 615 282,900 Icon Health & Fitness, Inc., 12.00%, 09/27/05 (c) ......................... 225 202,500 International CableTel, Inc., Series B, 11.50%, 02/01/06 (f) ......................... 250 168,750 Interpool Capital Trust, Series B, 9.875%, 02/15/27 (e) ......................... 1,915 1,397,950 IT Group, Inc., Series B, 11.25%, 04/01/09 (e) ......................... 1,225 1,151,500 John Q. Hammons Hotels, Inc., 8.875%, 02/15/04 (e) ......................... 1,000 990,000 Kelvin 2nd Event, 8.70%, 02/14/03 (c), (e) ..................... 600 570,000 LDM Technologies, Inc., Series B, 10.75%, 01/15/07 ............................. 150 93,000 LodgeNet Entertainment Corp., 10.25%, 12/15/06 (e) ......................... 810 818,100 Lomak Petroleum Corp., 8.75%, 01/15/07 (e) .......................... 540 518,400 Lyondell Chemical Co., 10.875%, 05/01/09 (e) ........................ 275 270,188 Mandalay Resort Group, Series B, 10.25%, 08/01/07 ............................. 520 544,700 MBNA Master Credit Card Trust: Series 1994-C, Class B, 4.45%, 03/15/04 (d), (e) ..................... 2,845 2,848,200 Series 1999-E, Class C, 4.68%, 06/15/04 (c), (d), (e) ................ 8,595 8,595,000 McCaw International, Ltd., 0.00%, 04/15/07 (f) .......................... 615 202,950 Merrill Lynch Mortgage Investors, Inc., Series 1996-C1, Class IO, 1.0624%, 04/25/28 (c), (d), (e), (i) ......... 12,552 290,711 Metromedia Fiber Network, Inc., Series B, 10.00%, 11/15/08 (e) ......................... 301 115,885 MGM Grand, Inc., 9.75%, 06/01/07 (e) .......................... 875 934,062 Michael Foods, Inc., 11.75%, 04/01/11 (c) ......................... 710 727,750 Morgan Stanley Capital I, Inc., Series 1996-WF1, Class X, 1.3732%, 11/15/28 (c), (d), (e), (i) ......... 5,584 256,905 Namazu Re, Ltd., 8.49%, 12/02/04 (c), (d), (e) ................ 1,000 980,230 National Equipment Services, Inc., Series B, 10.00%, 11/30/04 ............................. 340 265,200 Nextel International, Inc., 12.75%, 08/01/10 ............................. 480 148,800 Nextmedia Operating, Inc., 10.75%, 07/01/11 (c) ......................... 265 265,000 Nortek, Inc., 9.875%, 06/15/11 (c) ......................... 170 163,625 North American Van Lines, Inc., 13.375%, 12/01/09 (c), (e) ................... 1,285 1,182,200 NTL Communications Corp., 12.375%, 02/01/08 (c)..................... EUR 135 81,800 Orion Power Holdings, Inc., 12.00%, 05/01/10 (c), (e) .................... 480 532,800 THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS. 52 ================================================================================ THE LAZARD FUNDS, INC. PORTFOLIOS OF INVESTMENTS (CONTINUED) JUNE 30, 2001 (UNAUDITED) -------------------------------------------------------------------------------- PRINCIPAL AMOUNT DESCRIPTION (000) (g) VALUE -------------------------------------------------------------------------------- LAZARD STRATEGIC YIELD PORTFOLIO (CONTINUED) Pacific Reinsurance Ltd., 7.70%, 05/31/03 (c), (d), (e) ........... 1,340 $ 1,335,310 Penhall International Corp., 12.00%, 08/01/06 (e) .................... 750 735,000 Penn National Gaming, Inc., 11.125%, 03/01/08 (c) ................... 685 712,400 Petro Stopping Centers, 10.50%, 02/01/07 (e) .................... 640 496,000 Phoenix Color Corp., 10.375%, 02/01/09 (e) ................... 870 704,700 Plains Resources, Inc., Series F, 10.25%, 03/15/06 ........................ 350 363,125 PMD Group, Inc., 11.00%, 02/28/11 (c) .................... 920 933,800 Prime Capital Calquake and Euro Wind, Ltd., 11.32%, 01/17/04 (c), (d), (e) .......... 840 831,600 Prime Capital Hurricane Hydrocarbons, 10.32%, 01/17/04 (c), (d), (e) .......... 875 861,875 Prudential Home Mortgage Securities: Series 1993-41, Class A5, 0.1148%, 10/25/10 (d), (i) .............. 152 0 Series 1993-5, Class A9, 0.9058%, 03/25/10 (d), (i) .............. 360 0 Railamerica Transportation Corp., 12.875%, 08/15/10 ....................... 650 671,125 Renters Choice, Inc., 11.00%, 08/15/08 (e) .................... 1,005 1,027,612 Rose Hills Co., 9.50%, 11/15/04 ......................... 590 465,362 Royster-Clark, Inc., 10.25%, 04/01/09 ........................ 235 186,825 Sabreliner Corp., 11.00%, 06/15/08 (c), (e) ............... 935 702,419 Sears Credit Account Master Trust, Series 2000-4, Class A, 4.23%, 10/18/11 (d), (e) ................ 2,525 2,527,857 Sinclair Broadcast Group, Inc., 8.75%, 12/15/07 ......................... 245 233,363 Sola International, Inc., 11.00%, 03/15/08 (c)...................EUR 290 255,824 Spectrasite Holdings, Inc.: 0.00%, 04/15/09 (f) ..................... 380 174,800 Series B, 0.00%, 03/15/10 (f) ..................... 325 136,500 Structured Asset Securities Corp.: Series 1996-CFL, Class X2, 1.0235%, 02/25/28 (d), (i) .............. 1,049 14,427 Series 1996-CFL, Class X1, 1.6002%, 02/25/28 (d), (e), (i) ......... 2,693 161,599 Superior Wholesale Inventory Financing Trust, Series 1999-A, Class A1, 4.105%, 05/15/06 (d), (e) ............... 2,520 2,522,066 Telewest Finance (Jersey), Ltd., 6.00%, 07/07/05 (c) ..................... 350 245,000 The Manitowoc Co., Inc., 10.375%, 05/15/11 (c)..................EUR 450 385,166 Transwestern Publishing Co., 9.625%, 11/15/07 (c) .................... 780 785,850 Travelcenters of America, Inc., 12.75%, 05/01/09 ........................ 320 329,200 Ubiquitel Operating Co., 0.00%, 04/15/10 (f) ..................... 1,047 413,565 United International Holding, Inc., Series B, 0.00%, 02/15/08 (f) ..................... 410 137,350 United Rentals, Inc., Series B: 9.00%, 04/01/09 ......................... 25 23,125 9.25%, 01/15/09 (e) ..................... 1,760 1,645,600 URS Corp., Series B, 12.25%, 05/01/09 (e) .................... 1,070 1,094,075 Venture Holdings Trust, Series B, 9.50%, 07/01/05 ......................... 190 148,200 Volkswagen Credit Auto Master Trust, Series 2000-1, Class A, 4.0363%, 08/20/07 (d), (e) .............. 2,200 2,203,866 Williams Scotsman, Inc., 9.875%, 06/01/07 (e) .................... 940 893,000 XO Communications, Inc., 10.75%, 11/15/08 ........................ 220 70,400 Yamaha Motor Master Trust, Series 2000-1, Class B, 4.68%, 05/15/08 (d), (e) ................ 2,575 2,571,472 ----------- TOTAL UNITED STATES ...................... 109,816,383 ----------- VENEZUELA--0.1% Citibank NDF Linked Note, 17.00%, 07/06/01 (h).................. USD 259 260,606 ----------- TOTAL CURRENCY DENOMINATED BONDS (Identified cost $158,457,920)............ 150,047,255 ----------- THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS. 53 ================================================================================ THE LAZARD FUNDS, INC. PORTFOLIOS OF INVESTMENTS (CONTINUED) JUNE 30, 2001 (UNAUDITED) -------------------------------------------------------------------------------- DESCRIPTION SHARES VALUE -------------------------------------------------------------------------------- LAZARD STRATEGIC YIELD PORTFOLIO (CONTINUED) PREFERRED STOCKS--1.9% BERMUDA--0.4% Global Crossing Holdings, Ltd. ......... 10,150 $ 781,550 ---------- UNITED KINGDOM--0.0% Avecia Group PLC (a) ................... 1,283 38,490 ---------- UNITED STATES--1.5% Adelphia Communications Corp., Series B .............................. 11,800 1,156,400 American Restaurant Group, Inc., Series B (a) .......................... 4 400 Granite Broadcasting Corp. (a) ......... 955 181,450 High Voltage Engineering Corp., Series A (a) .......................... 1,977 395,400 Nextel Communications, Inc., Series E (a) .......................... 669 448,230 Paxson Communications Corp. (a), (e) .............................. 94 878,900 Sinclair Capital ....................... 3,950 370,313 XO Communications, Inc. (a) ............ 2,716 10,864 ---------- TOTAL UNITED STATES .................... 3,441,957 ---------- TOTAL PREFERRED STOCKS (Identified cost $6,922,967)............ 4,261,997 ---------- WARRANTS--0.0% CANADA--0.0% GT Group Telecom, Inc., 02/01/10 (a), (c) ..................... 775 23,131 ---------- MEXICO--0.0% United Mexican States, Rights, 06/30/03 (a) .......................... 698,000 6,631 ---------- NORWAY--0.0% Enitel ASA, 04/03/05 (a) .......................... 100 1 ---------- UNITED KINGDOM--0.0% Ono Finance PLC, 05/31/09 (a) .......................... 350 8,898 05/31/09 (a), (c) ..................... 90 2,288 ---------- TOTAL UNITED KINGDOM ................... 11,186 ---------- UNITED STATES--0.0% Motient Corp., 04/01/08 (a), (c) ..................... 1,385 692 Ubiquitel Operating Co., 04/15/10 (a), (c) ..................... 922 $ 18,440 ---------- TOTAL UNITED STATES .................... 19,132 ---------- TOTAL WARRANTS (Identified cost $46,658)............... 60,081 ---------- PRINCIPAL AMOUNT (000) --------- U.S. GOVERNMENT SECURITIES--4.5% Federal Home Loan Mortgage Corp., 5.25%, 02/15/04 ....................... $ 9,800 9,878,106 Federal National Mortgage Association, 6.00%, 12/15/05 ....................... 300 305,952 ---------- TOTAL U.S. GOVERNMENT SECURITIES (Identified cost $10,193,882)........... 10,184,058 ---------- DISCOUNT NOTES--24.1% Federal Farm Credit Bank, 4.45%, 07/10/01 ....................... 950 948,943 Federal Home Loan Bank: 3.53%, 08/08/01 ....................... 103 102,616 3.53%, 08/22/01 ....................... 400 397,961 3.67%, 07/18/01 ....................... 1,261 1,258,815 3.67%, 07/27/01 ....................... 300 299,235 3.69%, 06/04/02 ....................... 67 64,679 3.70%, 08/13/01 ....................... 1,635 1,627,774 3.70%, 09/04/01 ....................... 430 427,127 3.70%, 12/07/01 ....................... 560 551,022 3.74%, 08/15/01 ....................... 2,687 2,674,438 3.80%, 07/17/01 ....................... 1,580 1,577,331 3.80%, 08/21/01 ....................... 1,237 1,230,341 3.83%, 08/14/01 ....................... 100 99,532 3.85%, 07/23/01 ....................... 175 174,588 3.90%, 07/13/01 ....................... 2,129 2,126,232 3.98%, 04/18/02 ....................... 1,963 1,899,847 4.05%, 07/30/01 ....................... 1,165 1,161,199 4.10%, 07/20/01 ....................... 272 271,412 4.46%, 07/06/01 ....................... 2,328 2,326,558 4.54%, 07/03/01 ....................... 699 698,824 4.56%, 02/27/02 ....................... 342 331,560 4.86%, 11/15/01 ....................... 600 588,903 5.36%, 12/21/01 ....................... 550 535,833 5.38%, 12/21/01 ....................... 796 775,420 5.55%, 12/10/01 ....................... 300 292,508 THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS. 54 ================================================================================ THE LAZARD FUNDS, INC. PORTFOLIOS OF INVESTMENTS (CONTINUED) JUNE 30, 2001 (UNAUDITED) -------------------------------------------------------------------------------- PRINCIPAL AMOUNT DESCRIPTION (000) VALUE -------------------------------------------------------------------------------- LAZARD STRATEGIC YIELD PORTFOLIO (CONTINUED) Federal Home Loan Mortgage Corp.: 3.46%, 09/27/01 .......................... $1,539 $1,525,983 3.785%, 08/16/01 ......................... 1,500 1,492,745 3.79%, 07/31/01 .......................... 1,195 1,191,226 4.45%, 12/12/01 .......................... 1,000 979,728 4.75%, 01/31/02 .......................... 750 728,823 Federal National Mortgage Association: 3.56%, 07/25/01 .......................... 1,964 1,959,339 3.61%, 08/28/01 .......................... 2,395 2,381,310 3.61%, 12/06/01 .......................... 454 446,807 3.65%, 07/20/01 .......................... 3,690 3,682,892 3.67%, 09/13/01 .......................... 930 922,984 3.70%, 09/07/01 .......................... 1,718 1,705,993 3.71%, 08/07/01 .......................... 816 812,889 3.71%, 08/13/01 .......................... 4,110 4,091,787 3.76%, 08/03/01 .......................... 154 153,469 3.81%, 07/17/01 .......................... 630 628,933 3.82%, 08/30/01 .......................... 499 495,823 3.88%, 07/03/01 .......................... 1,838 1,837,604 3.88%, 07/10/01 .......................... 2,157 2,154,908 4.41%, 03/08/02 .......................... 1,038 1,006,211 4.54%, 07/05/01 .......................... 1,784 1,783,100 5.45%, 12/14/01 .......................... 1,727 1,683,600 6.31%, 08/10/01 .......................... 907 900,641 6.42%, 07/11/01 .......................... 264 263,529 ---------- TOTAL DISCOUNT NOTES (Identified cost $55,273,022)......... 55,273,022 ---------- REPURCHASE AGREEMENT--2.3% State Street Corp., 3.88%, 07/02/01, (Dated 06/29/01, collateralized by $4,990,000 United States Treasury Note, 6.00%, 08/15/09, with a value of $5,326,825) (e) (Identified cost $5,219,000).............. $5,219 5,219,000 ----------- TOTAL INVESTMENTS (Identified cost $236,113,449) (b)......... 98.3% $225,045,413 CASH AND OTHER ASSETS IN EXCESS OF LIABILITIES ............................ 1.7 3,969,570 ------- ------------ NET ASSETS ................................. 100.0% $229,014,983 ======= ============ THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS. 55 ================================================================================ THE LAZARD FUNDS, INC. PORTFOLIOS OF INVESTMENTS (CONTINUED) JUNE 30, 2001 (UNAUDITED) -------------------------------------------------------------------------------- LAZARD STRATEGIC YIELD PORTFOLIO (CONTINUED) Forward Foreign Currency Contracts open at June 30, 2001:
Forward U.S. $ Cost U.S. $ Foreign Currency Expiration Foreign on Origination Current Unrealized Unrealized Purchase Contracts Date Currency Date Value Appreciation Depreciation -------------------- ------------ ---------------- ---------------- ------------ -------------- ------------- ARS 7/5/01 774,851 $ 774,000 $ 771,303 $ -- $ 2,697 ARS 7/5/01 1,745,266 1,743,000 1,737,274 -- 5,726 ARS 7/6/01 1,122,080 1,120,000 1,116,497 -- 3,503 ARS 7/10/01 802,000 800,000 795,714 -- 4,286 ARS 7/10/01 1,575,731 1,570,000 1,563,380 -- 6,620 ARS 7/10/01 476,844 474,000 473,107 -- 893 BRL 7/31/01 1,325,340 555,000 566,530 11,530 -- BRL 12/5/01 1,646,134 766,000 667,532 -- 98,468 CLP 8/14/01 741,240,000 1,305,000 1,175,965 -- 129,035 CLP 9/28/01 852,911,000 1,453,000 1,347,837 -- 105,163 CLP 10/4/01 409,726,000 698,000 646,972 -- 51,028 CLP 10/10/01 39,174,800 68,000 61,810 -- 6,190 CLP 12/12/01 734,363,544 1,224,960 1,149,197 -- 75,763 CLP 12/13/01 909,786,600 1,527,000 1,423,529 -- 103,471 CLP 2/27/02 200,925,000 342,000 312,434 -- 29,566 CNY 7/11/01 10,468,710 1,260,000 1,264,551 4,551 -- CNY 7/16/01 5,676,664 685,000 685,637 637 -- CNY 7/31/01 9,671,714 1,165,000 1,167,799 2,799 -- CNY 8/21/01 9,950,640 1,200,000 1,200,608 608 -- CNY 9/5/01 497,622 60,000 60,010 10 -- COP 7/3/01 3,196,732,000 1,358,000 1,387,570 29,570 -- COP 8/2/01 3,196,732,000 1,374,743 1,374,743 -- -- COP 8/14/01 1,035,100,000 440,000 443,190 3,190 -- COP 8/28/01 1,265,376,000 538,000 539,186 1,186 -- COP 8/29/01 1,949,670,000 830,000 830,484 484 -- COP 8/30/01 1,193,109,000 499,000 508,061 9,061 -- COP 8/31/01 86,629,950 37,000 36,878 -- 122 COP 9/7/01 1,467,165,000 623,000 623,214 214 -- CRC 8/22/01 164,780,350 497,000 491,704 -- 5,296 CZK 7/9/01 26,067,954 669,310 652,286 -- 17,024 CZK 7/11/01 29,481,891 753,829 737,660 -- 16,169 CZK 7/17/01 9,915,000 263,767 248,029 -- 15,738 CZK 7/17/01 1,562,904 39,846 39,097 -- 749 CZK 7/17/01 4,719,924 120,197 118,071 -- 2,126 CZK 8/7/01 61,407,642 1,534,961 1,534,997 36 -- CZK 8/13/01 65,826,510 1,643,034 1,645,096 2,062 -- CZK 8/13/01 51,398,840 1,282,630 1,284,529 1,899 -- DKK 7/26/01 41,560,622 4,984,722 4,726,257 -- 258,465 DKK 7/26/01 426,966 49,081 48,554 -- 527 EUR 7/26/01 232,993 210,393 197,350 -- 13,043 EUR 7/26/01 96,153 86,730 81,444 -- 5,286 EUR 7/26/01 102,764 92,161 87,043 -- 5,118 EUR 7/26/01 28,321 25,376 23,988 -- 1,388 EUR 7/26/01 40,510 36,170 34,313 -- 1,857 EUR 7/26/01 33,573 30,058 28,437 -- 1,621 EUR 7/26/01 243,590 216,790 206,326 -- 10,464
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS. 56 ================================================================================ THE LAZARD FUNDS, INC. PORTFOLIOS OF INVESTMENTS (CONTINUED) JUNE 30, 2001 (UNAUDITED) -------------------------------------------------------------------------------- LAZARD STRATEGIC YIELD PORTFOLIO (CONTINUED)
Forward U.S. $ Cost U.S. $ Foreign Currency Expiration Foreign on Origination Current Unrealized Unrealized Purchase Contracts Date Currency Date Value Appreciation Depreciation -------------------- ------------ ---------------- ---------------- ------------ -------------- ------------- EUR 7/26/01 81,720 $ 73,000 $ 69,219 $ -- $ 3,781 EUR 7/26/01 234,090 209,000 198,279 -- 10,721 EUR 7/26/01 286,642 251,098 242,792 -- 8,306 EUR 7/26/01 250,461 213,000 212,146 -- 854 EUR 7/26/01 116,946 99,053 99,056 3 -- EUR 7/26/01 34,259 28,979 29,019 40 -- EUR 7/26/01 82,486 70,000 69,867 -- 133 EUR 7/26/01 26,083 22,128 22,093 -- 35 EUR 7/26/01 36,544 31,000 30,953 -- 47 EUR 7/26/01 87,200 74,183 73,860 -- 323 EUR 7/26/01 211,665 180,000 179,285 -- 715 EUR 7/26/01 129,420 109,013 109,621 608 -- EUR 7/26/01 131,534 112,015 111,412 -- 603 EUR 7/26/01 21,449 18,264 18,168 -- 96 EUR 7/26/01 29,345 25,237 24,856 -- 381 EUR 7/26/01 305,794 263,900 259,014 -- 4,886 EUR 7/26/01 227,601 195,965 192,783 -- 3,182 EUR 7/26/01 688,136 584,000 582,866 -- 1,134 GBP 7/26/01 40,996 58,941 57,678 -- 1,263 GBP 7/26/01 748,696 1,075,690 1,053,362 -- 22,328 GBP 7/26/01 2,498,467 3,588,374 3,515,162 -- 73,212 GBP 7/26/01 39,419 56,554 55,459 -- 1,095 GBP 7/26/01 71,009 100,400 99,905 -- 495 GBP 7/26/01 46,080 65,250 64,831 -- 419 HUF 10/15/01 233,100,000 745,586 794,575 48,989 -- ILS 7/23/01 4,933,108 1,180,000 1,179,718 -- 282 ILS 8/28/01 2,393,895 569,704 570,682 978 -- INR 7/5/01 38,144,000 800,000 807,475 7,475 -- INR 7/10/01 50,779,200 1,065,000 1,074,351 9,351 -- INR 7/18/01 14,858,480 314,000 314,166 166 -- INR 7/20/01 38,989,500 825,000 824,259 -- 741 INR 8/14/01 4,107,360 86,000 86,531 531 -- JPY 7/26/01 160,111,108 1,331,596 1,287,636 -- 43,960 JPY 7/26/01 178,664,828 1,481,835 1,436,847 -- 44,988 JPY 7/26/01 35,286,740 292,000 283,781 -- 8,219 JPY 7/26/01 2,884,680 24,000 23,199 -- 801 JPY 7/26/01 11,261,091 93,000 90,563 -- 2,437 JPY 7/26/01 8,494,795 71,000 68,316 -- 2,684 JPY 7/26/01 2,743,256 23,000 22,062 -- 938 JPY 7/26/01 26,294,400 220,000 211,463 -- 8,537 JPY 7/26/01 7,198,200 60,000 57,889 -- 2,111 JPY 7/26/01 19,953,200 166,826 160,466 -- 6,360 KES 7/18/01 55,857,308 706,000 700,504 -- 5,496 KES 7/25/01 41,610,023 527,000 521,025 -- 5,975 KES 8/13/01 7,853,918 99,000 97,905 -- 1,095 KRW 7/23/01 332,010,000 255,000 254,092 -- 908 KRW 7/23/01 241,887,500 185,000 185,120 120 -- KRW 8/13/01 1,679,600,000 1,300,000 1,283,444 -- 16,556 KRW 9/11/01 617,571,900 477,000 471,039 -- 5,961
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS. 57 ================================================================================ THE LAZARD FUNDS, INC. PORTFOLIOS OF INVESTMENTS (CONTINUED) JUNE 30, 2001 (UNAUDITED) -------------------------------------------------------------------------------- LAZARD STRATEGIC YIELD PORTFOLIO (CONTINUED)
Forward U.S. $ Cost U.S. $ Foreign Currency Expiration Foreign on Origination Current Unrealized Unrealized Purchase Contracts Date Currency Date Value Appreciation Depreciation -------------------- ------------ ---------------- ---------------- -------------- -------------- ------------- MXN 11/16/01 8,822,000 $ 910,893 $ 940,281 $ 29,388 $ -- MXN 12/19/01 17,930,578 1,727,000 1,897,014 170,014 -- MXN 2/4/02 7,153,500 600,000 748,086 148,086 -- MXN 3/12/02 11,187,227 1,037,661 1,160,356 122,695 -- MXN 4/18/02 20,340,000 1,962,373 2,091,968 129,595 -- MXN 6/11/02 1,667,000 167,109 169,357 2,248 -- PEN 9/7/01 3,960,615 1,095,000 1,110,536 15,536 -- PEN 9/13/01 1,616,400 450,000 452,520 2,520 -- PEN 9/27/01 5,509,620 1,539,000 1,536,811 -- 2,189 PHP 7/3/01 35,683,950 699,000 676,986 -- 22,014 PHP 7/10/01 49,732,500 950,000 941,845 -- 8,155 PHP 7/10/01 55,375,800 1,068,000 1,048,719 -- 19,281 PHP 9/4/01 16,929,000 330,000 315,859 -- 14,141 PHP 12/11/01 23,971,200 454,000 437,591 -- 16,409 PLN 9/4/01 2,905,637 717,707 709,314 -- 8,393 PLN 10/2/01 11,671,073 2,315,000 2,825,274 510,274 -- PLN 11/16/01 12,351,436 2,404,500 2,950,312 545,812 -- PLN 11/20/01 2,102,056 409,000 501,514 92,514 -- PLN 2/5/02 9,269,110 2,050,915 2,165,224 114,309 -- RUB 7/3/01 14,069,952 480,000 482,079 2,079 -- RUB 7/13/01 16,488,637 563,000 563,830 830 -- RUB 7/17/01 18,524,050 629,000 632,412 3,412 -- RUB 7/19/01 14,318,898 489,000 488,456 -- 544 RUB 7/23/01 10,115,297 345,000 344,508 -- 492 RUB 7/24/01 22,179,080 758,000 755,074 -- 2,926 RUB 8/1/01 22,873,076 779,000 776,306 -- 2,694 SKK 7/23/01 8,557,666 172,527 171,281 -- 1,246 SKK 8/7/01 7,779,838 153,752 155,458 1,706 -- SKK 8/8/01 41,517,034 817,240 829,511 12,271 -- SKK 8/13/01 87,713,670 1,734,586 1,751,548 16,962 -- SKK 8/14/01 49,842,309 982,879 995,188 12,309 -- SKK 8/15/01 34,909,686 692,357 696,955 4,598 -- SKK 8/27/01 23,870,000 476,842 475,919 -- 923 SKK 12/21/01 27,287,040 548,373 537,644 -- 10,729 SKK 12/27/01 39,203,000 795,806 771,971 -- 23,835 TWD 7/20/01 17,953,750 542,000 517,560 -- 24,440 TWD 8/21/01 34,514,166 1,042,000 990,696 -- 51,304 UYU 7/16/01 12,462,268 938,000 908,872 -- 29,128 VEB 7/9/01 529,475,000 734,107 734,025 -- 82 VEB 7/16/01 367,356,000 506,000 508,003 2,003 -- VEB 7/19/01 117,207,000 162,000 161,908 -- 92 VEB 7/23/01 1,050,500,000 1,452,974 1,449,078 -- 3,896 VEB 7/25/01 873,144,000 1,206,000 1,203,573 -- 2,427 VEB 7/31/01 467,390,000 639,822 642,884 3,062 -- VEB 8/8/01 75,088,000 103,498 102,975 -- 523 VEB 8/22/01 830,775,000 1,140,000 1,133,415 -- 6,585 VEB 8/29/01 306,749,900 419,000 417,414 -- 1,586 ZAR 12/7/01 4,653,600 560,000 562,743 2,743 -- ----------- ----------- ---------- ---------- Total Forward Foreign Currency Purchase Contracts $98,178,270 $98,735,840 $2,081,064 $1,523,494 =========== =========== ---------- ----------
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS. 58 ================================================================================ THE LAZARD FUNDS, INC. PORTFOLIOS OF INVESTMENTS (CONTINUED) JUNE 30, 2001 (UNAUDITED) -------------------------------------------------------------------------------- LAZARD STRATEGIC YIELD PORTFOLIO (CONTINUED)
Forward U.S. $ Cost U.S. $ Foreign Currency Expiration Foreign on Origination Current Unrealized Unrealized Sale Contracts Date Currency Date Value Appreciation Depreciation ------------------ ------------ ---------------- ---------------- ------------ -------------- ------------- BRL 7/31/01 1,113,552 $ 444,000 $ 475,999 $ -- $31,999 BRL 10/16/01 3,417,120 1,512,000 1,412,909 99,091 -- BRL 12/5/01 1,646,134 759,988 667,532 92,456 -- BRL 12/6/01 2,277,990 885,000 923,422 -- 38,422 BRL 12/26/01 1,053,700 410,000 424,058 -- 14,058 BRL 2/8/02 3,166,800 1,300,000 1,251,799 48,201 -- BRL 2/8/02 1,158,300 440,000 457,862 -- 17,862 CAD 7/26/01 835,936 541,469 550,558 -- 9,089 CLP 8/14/01 233,021,600 383,259 369,685 13,574 -- CLP 8/27/01 774,073,750 1,241,000 1,226,664 14,336 -- CLP 9/28/01 28,763,000 47,172 45,454 1,718 -- CLP 9/28/01 824,148,000 1,342,807 1,302,383 40,424 -- CLP 10/4/01 121,793,760 198,000 192,317 5,683 -- CLP 10/4/01 287,932,240 467,423 454,655 12,768 -- CLP 10/10/01 39,174,800 63,803 61,810 1,993 -- CLP 12/12/01 733,134,000 1,180,000 1,147,273 32,727 -- CLP 12/13/01 11,809,450 19,000 18,478 522 -- COP 7/3/01 3,196,732,000 1,386,670 1,387,570 -- 900 DKK 7/26/01 63,207,063 7,590,616 7,187,881 402,735 -- EUR 7/9/01 752,767 669,310 637,813 31,497 -- EUR 7/11/01 855,974 753,829 725,232 28,597 -- EUR 7/17/01 45,000 39,846 38,122 1,724 -- EUR 7/17/01 137,000 120,198 116,062 4,136 -- EUR 7/23/01 196,755 172,527 166,665 5,862 -- EUR 7/26/01 210,169 187,681 178,018 9,663 -- EUR 7/26/01 9,442,374 8,470,282 7,997,901 472,381 -- EUR 7/26/01 6,484,795 5,815,369 5,492,765 322,604 -- EUR 7/26/01 6,759,360 6,055,170 5,725,328 329,842 -- EUR 7/26/01 76,794 68,293 65,046 3,247 -- EUR 7/26/01 82,213 73,000 69,636 3,364 -- EUR 7/26/01 445,491 398,001 377,340 20,661 -- EUR 7/26/01 110,000 98,274 93,172 5,102 -- EUR 7/26/01 279,475 247,000 236,722 10,278 -- EUR 7/26/01 325,595 285,000 275,786 9,214 -- EUR 7/26/01 307,194 271,394 260,200 11,194 -- EUR 7/26/01 204,319 179,800 173,062 6,738 -- EUR 7/26/01 39,600 34,848 33,542 1,306 -- EUR 7/26/01 81,900 70,106 69,371 735 -- EUR 7/26/01 127,976 109,829 108,398 1,431 -- EUR 7/26/01 19,211 16,466 16,272 194 -- EUR 7/26/01 480,000 405,936 406,571 -- 635 EUR 7/26/01 452,599 382,700 383,362 -- 662 EUR 7/26/01 882,379 748,160 747,394 766 -- EUR 7/26/01 17,642 15,000 14,944 56 -- EUR 7/26/01 280,000 235,869 237,166 -- 1,297 EUR 7/26/01 182,826 156,000 154,858 1,142 -- EUR 7/26/01 312,247 268,845 264,480 4,365 -- EUR 7/26/01 14,434 12,341 12,226 115 -- EUR 7/26/01 327,440 278,000 277,349 651 --
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS. 59 ================================================================================ THE LAZARD FUNDS, INC. PORTFOLIOS OF INVESTMENTS (CONTINUED) JUNE 30, 2001 (UNAUDITED) -------------------------------------------------------------------------------- LAZARD STRATEGIC YIELD PORTFOLIO (CONCLUDED)
Forward U.S. $ Cost U.S. $ Foreign Currency Expiration Foreign on Origination Current Unrealized Unrealized Sale Contracts Date Currency Date Value Appreciation Depreciation ------------------ ------------ -------------- ---------------- -------------- -------------- ------------- EUR 8/7/01 180,645 $ 153,752 $ 152,979 $ 773 $ -- EUR 8/7/01 1,807,000 1,534,961 1,530,255 4,706 -- EUR 8/8/01 962,000 817,240 814,655 2,585 -- EUR 8/13/01 2,029,000 1,734,586 1,718,085 16,501 -- EUR 8/13/01 1,930,000 1,643,034 1,634,255 8,779 -- EUR 8/13/01 1,505,311 1,282,630 1,274,643 7,987 -- EUR 8/14/01 1,153,223 982,879 976,492 6,387 -- EUR 8/15/01 806,098 692,357 682,552 9,805 -- EUR 8/27/01 555,400 476,842 470,184 6,658 -- EUR 10/15/01 840,485 745,586 711,068 34,518 -- EUR 12/21/01 608,000 548,373 514,043 34,330 -- EUR 12/27/01 868,861 795,806 734,549 61,257 -- GBP 7/26/01 4,992,426 7,167,776 7,023,980 143,796 -- GBP 7/26/01 116,704 167,248 164,194 3,054 -- GBP 7/26/01 117,013 166,000 164,628 1,372 -- GBP 7/26/01 182,753 257,544 257,120 424 -- HUF 10/15/01 233,100,000 779,599 794,575 -- 14,976 JPY 7/26/01 191,372,874 1,591,789 1,539,047 52,742 -- JPY 7/26/01 8,231,260 68,411 66,197 2,214 -- JPY 7/26/01 851,500,617 7,071,090 6,847,885 223,205 -- JPY 7/26/01 2,882,520 24,000 23,182 818 -- JPY 7/26/01 15,509,760 128,000 124,732 3,268 -- JPY 7/26/01 11,544,162 95,000 92,840 2,160 -- JPY 7/26/01 13,026,540 109,100 104,761 4,339 -- JPY 7/26/01 24,075,882 201,218 193,622 7,596 -- JPY 7/26/01 3,755,677 30,400 30,204 196 -- MXN 8/16/01 8,822,000 936,270 961,065 -- 24,795 MXN 6/11/02 723,985 73,389 73,553 -- 164 PLN 10/2/01 4,049,570 919,312 980,299 -- 60,987 PLN 11/16/01 1,109,382 254,096 264,991 -- 10,895 PLN 11/16/01 1,606,501 382,000 383,735 -- 1,735 PLN 11/16/01 9,635,553 2,318,189 2,301,585 16,604 -- TWD 7/20/01 17,953,750 524,580 517,560 7,020 -- TWD 7/21/01 34,514,166 1,005,511 990,696 14,815 -- ----------- ----------- ---------- ---------- Total Forward Foreign Currency Sale Contracts $82,529,849 $80,027,323 $2,731,002 $ 228,476 =========== =========== ---------- ---------- Gross unrealized appreciation/depreciation from Forward Foreign Currency Contracts $4,812,066 $1,751,970 ========== ==========
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS. 60 ================================================================================ THE LAZARD FUNDS, INC. PORTFOLIOS OF INVESTMENTS (CONCLUDED) JUNE 30, 2001 (UNAUDITED) -------------------------------------------------------------------------------- PRINCIPAL AMOUNT DESCRIPTION (000) VALUE -------------------------------------------------------------------------------- LAZARD MORTGAGE PORTFOLIO ASSET-BACKED SECURITIES--9.3% American Express Master Trust, Series 1996-2, Class A, 4.10%, 08/15/02 (d) ..................... $ 170 $ 170,000 BA Master Credit Card Trust, Series 1996-A, Class A, 4.11%, 08/15/03 (d) ..................... 365 365,000 ---------- TOTAL ASSET-BACKED SECURITIES (Identified cost $535,053)................ 535,000 ---------- MORTGAGE PASS-THROUGH SECURITIES--96.6% Federal Home Loan Mortgage Corp.: Pool#C00610, 6.50%, 05/01/28 ......................... 155 153,437 6.00%, TBA .............................. 660 641,912 6.50%, TBA .............................. 894 880,313 7.00%, TBA .............................. 292 297,475 7.50%, TBA .............................. 951 974,283 8.00%, TBA .............................. 329 339,590 Federal National Mortgage Association: Pool#540449, 7.00%, 10/01/30 (e) ..................... 591 594,561 Pool#568949, 7.00%, 01/01/31 ......................... 48 48,804 6.50%, TBA .............................. 435 433,045 7.00%, TBA .............................. 470 472,059 Government National Mortgage Association: Pool#486598, 6.50%, 10/15/28 (e) ..................... 437 434,011 Pool#529740, 7.00%, 02/15/31 (e) ..................... 309 312,380 ---------- TOTAL MORTGAGE PASS-THROUGH SECURITIES (Identified cost $5,605,455)............. 5,581,870 ---------- DISCOUNT NOTES--62.7% Federal Farm Credit Bank, 3.72%, 07/16/01 (e) ..................... $ 550 $ 549,148 Federal Home Loan Bank: 3.72%, 07/19/01 (e) ..................... 1,200 1,197,768 3.80%, 07/16/01 (e) ..................... 1,875 1,872,031 ---------- TOTAL DISCOUNT NOTES (Identified cost $3,618,947).............. 3,618,947 ---------- REPURCHASE AGREEMENT--2.2% State Street Corp., 3.88%, 07/02/01, (Dated 06/29/01, collateralized by $125,000 United States Treasury Note, 6.00%, 08/15/09, with a value of $133,438) (e) (Identified cost $129,000)............... 129 129,000 ---------- TOTAL INVESTMENTS (Identified cost $9,888,455) (b) ......... 170.8% $9,864,817 LIABILITIES IN EXCESS OF CASH AND OTHER ASSETS ............................. (70.8) (4,087,877) --------- ---------- NET ASSETS ................................ 100.0% $5,776,940 ========== ========== THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS. 61 ================================================================================ THE LAZARD FUNDS, INC. NOTES TO PORTFOLIOS OF INVESTMENTS JUNE 30, 2001 (UNAUDITED) -------------------------------------------------------------------------------- (a) Non-income producing security. (b) For federal income tax purposes, the aggregate cost, aggregate gross unrealized appreciation, aggregate gross unrealized depreciation and the net unrealized appreciation (depreciation) is as follows:
AGGREGATE AGGREGATE NET GROSS GROSS UNREALIZED AGGREGATE UNREALIZED UNREALIZED APPRECIATION PORTFOLIO COST APPRECIATION DEPRECIATION (DEPRECIATION) ------------------------------- ---------------- -------------- -------------- ----------------- Equity $ 216,337,479 $ 17,942,072 $ 14,992,447 $ 2,949,625 Mid Cap 22,269,373 2,726,365 568,521 2,157,844 Small Cap 581,475,906 124,689,635 34,990,921 89,698,714 Global Equity 109,631,969 4,677,298 15,052,432 (10,375,134) International Equity 2,910,982,055 137,548,968 437,721,104 (300,172,136) International Small Cap 316,519,107 46,677,288 34,668,620 12,008,668 Emerging Markets 369,724,683 41,098,524 61,980,945 (20,882,421) International Equity Select 311,724 4,575 15,079 (10,504) Bond 52,953,600 1,036,189 695,279 340,910 High Yield 74,790,862 1,418,572 8,538,732 (7,120,160) International Fixed-Income 82,529,955 689,003 7,076,076 (6,387,073) Strategic Yield 236,113,449 1,181,297 12,249,333 (11,068,036) Mortgage 9,888,455 -- 23,638 (23,638)
(c) Pursuant to Rule 144A of the Securities Act of 1933, these securities may only be traded among "qualified institutional buyers". (d) Variable rate security. Interest rate shown is the rate in effect at June 30, 2001. (e) Segregated security for forward foreign currency contracts and/or forward roll transactions. (f) Step-up bond. The interest payment rate increases at specified intervals. Rate shown reflects rate in effect at June 30, 2001, which may step up at a future date. (g) Principal amount denominated in respective country's currency unless otherwise noted. (h) Structured note. (i) Interest-only security. The principal amount shown represents the face value of the underlying security. (j) Issue in default. (k) Bankrupt security fair valued at zero. (l) Zero coupon security. THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS. 62 ================================================================================ THE LAZARD FUNDS, INC. NOTES TO PORTFOLIOS OF INVESTMENTS (CONTINUED) JUNE 30, 2001 (UNAUDITED) -------------------------------------------------------------------------------- ABBREVIATIONS: ADR-- American Depositary Receipt GDR-- Global Depositary Receipt LTN-- Letras do Tesouro Nacional (Brazilian sovereign debt) NDF--Non Deliverable Forwards NTN--Nota do Tesouro Nacional (Brazilian sovereign debt) TBA-- To Be Announced CURRENCY TERMS: ------------------------------ ARS-- Argentine Peso JPY-- Japanese Yen AUD-- Australian Dollar KES-- Kenyan Shilling BRL-- Brazilian Real KRW-- South Korean Won CAD-- Canadian Dollar MXN-- Mexican Peso CHF-- Swiss Franc NLG-- Netherlands Guilder CLP-- Chilean Peso NZD--New Zealand Dollar CNY-- Chinese Renminbi PEN-- Peruvian Nouveau Sol COP-- Colombian Peso PHP-- Philippines Peso CRC-- Costa Rican Colon PLN-- Polish Zloty CZK-- Czech Koruna RUB-- Russian Ruble DEM-- German Deutsche Mark SEK-- Swedish Krona DKK-- Danish Krone SKK-- Slovakian Koruna EUR-- Euro TWD-- Taiwan Dollar FRF-- French Franc USD-- United States Dollar GBP-- British Pound Sterling UYU-- Uruguayan Peso HUF-- Hungarian Forint VEB-- Venezuelan Bolivar ILS-- Israeli Shekel ZAR--South African Rand INR-- Indian Rupee THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS. 63 ================================================================================ THE LAZARD FUNDS, INC. NOTES TO PORTFOLIOS OF INVESTMENTS (CONTINUED) JUNE 30, 2001 (UNAUDITED) -------------------------------------------------------------------------------- PORTFOLIO HOLDINGS BY INDUSTRY, FOR THOSE PORTFOLIOS PREVIOUSLY PRESENTED BY COUNTRY:
LAZARD LAZARD LAZARD LAZARD LAZARD GLOBAL INTERNATIONAL INTERNATIONAL EMERGING INTERNATIONAL EQUITY EQUITY SMALL CAP MARKETS EQUITY SELECT PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO ----------- --------------- --------------- ----------- -------------- INDUSTRY Aerospace & Defense ....................... 1.4% 1.2% --% --% --% Apparel & Textiles ........................ -- -- 3.0 -- -- Automotive ................................ 1.9 2.9 1.6 -- -- Banking & Financial Services .............. 22.5 24.9 7.9 20.4 14.7 Brewery ................................... 2.9 1.6 -- 6.8 1.9 Broadcasting .............................. -- -- -- 1.4 -- Business Services & Supplies .............. 1.4 -- 13.1 -- -- Chemicals & Plastics ...................... 1.1 2.2 -- -- -- Commercial Services ....................... 0.2 0.4 -- -- -- Computer Software ......................... 1.9 -- 1.2 1.0 -- Computers & Business Equipment ............ 3.9 -- 1.2 0.5 -- Conglomerates ............................. -- -- -- 1.2 -- Construction Materials .................... -- 0.6 -- 1.6 -- Construction & Mining Equipment ........... -- -- 1.1 -- -- Cosmetics & Toiletries .................... 2.1 1.5 -- -- 1.7 Diversified ............................... 4.7 4.3 -- -- -- Drugs & Health Care ....................... 10.2 7.0 5.5 2.0 11.4 Electrical Equipment ...................... -- -- -- 2.7 -- Electronics ............................... 6.0 10.1 3.0 1.6 8.7 Food & Beverages .......................... 5.8 3.4 8.7 -- 11.3 Forest Products ........................... 0.8 1.0 -- -- -- Holding Company-Diversified ............... -- -- 1.9 -- -- Hotels & Restaurants ...................... 1.5 -- 2.0 -- -- Household Products & Home Furnishings ..... -- 1.1 7.0 0.8 -- Industrial & Machinery .................... -- 1.0 4.0 -- -- Insurance ................................. 5.0 6.1 3.3 5.8 8.8 Leisure & Entertainment ................... -- -- 1.2 -- -- Manufacturing ............................. 0.4 2.7 1.2 -- 2.8 Medical Products .......................... -- -- 3.4 -- -- Medical Supplies .......................... -- -- 1.2 -- -- Metals .................................... -- -- -- 3.2 -- Multimedia ................................ 3.2 1.6 -- -- 2.9 Oil & Gas ................................. 6.8 6.7 -- 6.0 10.8 Paper Products ............................ -- -- -- 1.5 -- Petrochemicals ............................ -- -- -- 1.5 -- Printing .................................. -- -- 0.6 -- -- Publishing ................................ -- 1.2 6.6 -- -- Repurchase Agreements ..................... 2.3 2.0 4.3 4.0 -- Retail .................................... 1.8 2.6 11.5 3.9 -- Semiconductor & Components ................ 2.3 -- -- -- -- Semiconductor Manufacturers ............... -- -- -- 2.6 -- Steel ..................................... -- -- 0.7 3.4 -- Telecommunications ........................ 6.1 8.3 -- 21.1 10.3 Tobacco ................................... -- 0.1 4.1 2.2 -- Transportation ............................ -- 0.6 -- -- -- Utilities ................................. 4.0 4.0 -- 3.6 2.7 ----- ------ ---- ------ ---- Total Investments ......................... 100.2% 99.1% 99.3% 98.8% 88.0% ===== ====== ==== ====== ====
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS. 64 ================================================================================ THE LAZARD FUNDS, INC. NOTES TO PORTFOLIOS OF INVESTMENTS (CONCLUDED) JUNE 30, 2001 (UNAUDITED) -------------------------------------------------------------------------------- PORTFOLIO HOLDINGS BY ASSET TYPE, FOR THOSE PORTFOLIOS PREVIOUSLY PRESENTED BY COUNTRY:
LAZARD LAZARD INTERNATIONAL STRATEGIC FIXED-INCOME YIELD PORTFOLIO PORTFOLIO --------------- ------------ ASSET TYPE Asset-Backed Securities ........................ 1.0% 27.2% Collateralized Mortgage Obligations ............ -- 0.5 Convertible Bonds .............................. -- 0.1 Corporate Bonds ................................ 64.0 28.2 Discount Notes ................................. 7.5 24.1 Foreign Government Obligations ................. 28.3 6.3 Mortgage Pass-Through Securities ............... -- 0.1 Preferred Stocks ............................... -- 1.9 Repurchase Agreements .......................... 0.2 2.3 Structured Notes ............................... 0.8 3.2 U.S. Government and Agency Obligations ......... 0.3 4.4 ----- ------ Total Investments .............................. 102.1% 98.3% ===== ======
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS. 65 ================================================================================ THE LAZARD FUNDS, INC. STATEMENTS OF ASSETS AND LIABILITIES JUNE 30, 2001 (UNAUDITED) ================================================================================
LAZARD LAZARD EQUITY MID CAP PORTFOLIO PORTFOLIO ------------------ ----------------- ASSETS Investments in securities, at value (cost $216,337,479, $22,269,373, $581,475,906, $109,631,969, $2,910,982,055, $316,519,107, $369,724,683, $311,724, $52,953,600, $74,790,862, $82,529,955, $236,113,449, and $9,888,455, respectively).................. $ 219,287,104 $ 24,427,217 Cash ......................................................... 318 333 Foreign currency (cost $0, $0, $0, $25,975, $1,913,696, $429,376, $95,994, $0, $0, $0, $350,823, $121,954, and $0, respectively)........................................ -- -- Receivables for: Investments sold ............................................ 726,925 72,518 Dividends and interest ...................................... 214,125 21,356 Capital stock sold .......................................... 48,927 10,827 Gross appreciation on foreign currency contracts ............ -- -- Collateral for securities on loan, at value .................. -- 6,035,661 Due from Investment Manager .................................. -- -- Deferred organizational and offering expenses ................ -- 6,489 -------------- ------------- Total assets ................................................. 220,277,399 30,574,401 -------------- ------------- LIABILITIES Payables for: Investments purchased ....................................... 1,626,268 372,686 Capital stock repurchased ................................... 4,309,837 121,653 Dividends payable ........................................... -- -- Gross depreciation on foreign currency contracts ............ -- -- Payable upon return of securities on loan .................... -- 6,035,661 Investment management fees payable ........................... 138,285 10,277 Accrued directors' fees payable .............................. 1,067 49 Accrued distribution fees payable ............................ 9,918 1,657 Other accrued expenses and payables .......................... 80,048 46,733 -------------- ------------- Total liabilities ............................................ 6,165,423 6,588,716 -------------- ------------- Net assets ................................................... $ 214,111,976 $ 23,985,685 ============== ============= NET ASSETS Paid in capital .............................................. $ 190,503,828 $ 17,931,491 Undistributed (distributions in excess of) investment income--net ...................................... 826,522 39,493 Unrealized appreciation (depreciation) on: Investments--net ............................................ 2,949,625 2,157,844 Foreign currency--net ....................................... -- -- Accumulated realized gain (loss)--net ........................ 19,832,001 3,856,857 -------------- ------------- Net assets ................................................... $ 214,111,976 $ 23,985,685 ============== ============= INSTITUTIONAL SHARES Net assets ................................................... $ 167,676,241 $ 16,683,556 Shares of capital stock outstanding* ......................... 9,877,613 1,345,686 NET ASSET VALUE, OFFERING AND REDEMPTION PRICE PER SHARE ..... $ 16.98 $ 12.40 OPEN SHARES Net assets ................................................... $ 46,435,735 $ 7,302,129 Shares of capital stock outstanding* ......................... 2,742,639 592,822 NET ASSET VALUE, OFFERING AND REDEMPTION PRICE PER SHARE ..... $ 16.93 $ 12.32 LAZARD LAZARD LAZARD GLOBAL INTERNATIONAL SMALL CAP EQUITY EQUITY PORTFOLIO PORTFOLIO PORTFOLIO ----------------- ----------------- ------------------- $ 671,174,620 $ 99,256,835 $ 2,610,809,919 135 283 746 -- 25,975 1,913,696 25,649,570 527,636 26,312,638 308,078 117,305 5,045,760 582,487 366 21,428,722 -- -- -- -- 9,249,665 -- -- -- -- -- -- -- ------------- -------------- --------------- 697,714,890 109,178,065 2,665,511,481 ------------- -------------- --------------- 7,324,462 584,601 23,700,834 147,611 -- 5,345,893 -- -- -- -- -- -- -- 9,249,665 -- 428,949 235,077 1,637,925 3,082 398 11,984 14,590 939 30,101 135,667 70,289 937,454 ------------- -------------- --------------- 8,054,361 10,140,969 31,664,191 ------------- -------------- --------------- $ 689,660,529 $ 99,037,096 $ 2,633,847,290 ============= ============== =============== $ 549,547,351 $ 113,370,218 $ 2,920,498,753 1,234,039 507,626 6,154,110 89,698,714 (10,375,134) (300,172,136) -- (5,343) (575,650) 49,180,425 (4,460,271) 7,942,213 ------------- -------------- --------------- $ 689,660,529 $ 99,037,096 $ 2,633,847,290 ============= ============== =============== $ 616,144,682 $ 95,286,504 $ 2,485,074,411 31,180,669 8,359,467 214,299,689 $ 19.76 $ 11.40 $ 11.60 $ 73,515,847 $ 3,750,592 $ 148,772,879 3,731,292 329,232 12,888,414 $ 19.70 $ 11.39 $ 11.54
*$0.001 par value, 1,750,000,000 shares authorized for the Portfolios in total. THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS. 66 ================================================================================ --------------------------------------------------------------------------------
LAZARD LAZARD LAZARD INTERNATIONAL EMERGING INTERNATIONAL LAZARD SMALL CAP MARKETS EQUITY SELECT BOND PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO ----------------- --------------- --------------- --------------- $ 328,527,775 $ 348,842,262 $ 301,220 $ 53,294,510 2,362 882 30,386 946 428,860 95,994 -- -- 201,794 4,368,058 -- -- 910,195 1,141,425 535 831,840 1,681,048 3,426,152 -- 51,039 -- -- -- -- 26,369,186 79,428,364 -- -- -- -- 14,167 -- -- -- 1,258 -- -------------- ------------- ----------- ------------ 358,121,220 437,303,137 347,566 54,178,335 -------------- ------------- ----------- ------------ 498,650 3,370,913 -- 53,966 11,675 800,007 -- -- -- -- -- 21,271 -- -- -- -- 26,369,186 79,428,364 -- -- 202,815 294,953 -- 31,717 1,050 1,248 2 296 439 1,187 2 1,939 159,827 235,771 5,127 55,639 -------------- ------------- ----------- ------------ 27,243,642 84,132,443 5,131 164,828 -------------- ------------- ----------- ------------ $ 330,877,578 $ 353,170,694 $ 342,435 $ 54,013,507 ============== ============= =========== ============ $ 331,632,061 $ 440,244,900 $ 352,435 $ 60,622,939 3,797,741 2,459,645 504 (160,907) 12,008,668 (20,882,421) (10,504) 340,910 (11,373) (32,729) -- -- (16,549,519) (68,618,701) -- (6,789,435) -------------- ------------- ----------- ------------ $ 330,877,578 $ 353,170,694 $ 342,435 $ 54,013,507 ============== ============= =========== ============ $ 327,615,004 $ 345,399,359 $ 332,733 $ 44,823,206 26,829,942 45,737,441 34,295 4,745,846 $ 12.21 $ 7.55 $ 9.70 $ 9.44 $ 3,262,574 $ 7,771,335 $ 9,702 $ 9,190,301 268,852 1,028,533 1,000 973,374 $ 12.14 $ 7.56 $ 9.70 $ 9.44 LAZARD LAZARD LAZARD INTERNATIONAL STRATEGIC LAZARD HIGH YIELD FIXED-INCOME YIELD MORTGAGE PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO ----------------- --------------- ---------------- ------------- $ 67,670,702 $ 76,142,882 $ 225,045,413 $ 9,864,817 603 38 241 154 -- 350,823 120,021 -- 1,147,745 662,054 18,465,786 407,278 1,619,460 1,144,165 2,607,138 22,010 583 9,684 15,731 -- -- 904,337 4,812,066 -- -- -- -- -- -- -- -- 2,596 7,270 -- -- 682 -------------- ------------ -------------- ----------- 70,446,363 79,213,983 251,066,396 10,297,537 -------------- ------------ -------------- ----------- 3,286,043 3,098,723 19,962,791 4,476,755 -- 43,148 752 -- 38,881 235 88,248 19,013 -- 1,248,101 1,751,970 -- -- -- -- -- 100,255 194,057 142,728 -- 411 332 960 144 2,318 4,319 1,683 -- 57,627 78,322 102,281 24,685 -------------- ------------ -------------- ----------- 3,485,535 4,667,237 22,051,413 4,520,597 -------------- ------------ -------------- ----------- $ 66,960,828 $ 74,546,746 $ 229,014,983 $ 5,776,940 ============== ============ ============== =========== $ 105,177,552 $ 82,831,108 $ 297,095,807 $ 5,760,214 23,009 562,103 (3,823,972) 11 (7,120,160) (6,387,073) (11,068,036) (23,638) -- (395,106) 3,057,556 -- (31,119,573) (2,064,286) (56,246,372) 40,353 -------------- ------------ -------------- ----------- $ 66,960,828 $ 74,546,746 $ 229,014,983 $ 5,776,940 ============== ============ ============== =========== $ 55,559,554 $ 52,711,401 $ 221,556,280 $ 5,776,940 8,718,651 5,929,058 27,777,179 573,674 $ 6.37 $ 8.89 $ 7.98 $ 10.07 $ 11,401,274 $ 21,835,345 $ 7,458,703 N/A 1,788,255 2,475,496 934,977 N/A $ 6.38 $ 8.82 $ 7.98 N/A
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS. 67 ================================================================================ THE LAZARD FUNDS, INC. STATEMENTS OF OPERATIONS FOR THE PERIOD ENDED JUNE 30, 2001 (UNAUDITED) --------------------------------------------------------------------------------
LAZARD LAZARD LAZARD LAZARD GLOBAL EQUITY MID CAP SMALL CAP EQUITY PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO --------------- -------------- ---------- ----------- INVESTMENT INCOME INCOME: Interest .................................................... $ 148,745 $ 28,390 $ 788,949 $ 87,789 Dividends ................................................... 1,799,084 140,841 3,333,242 985,640 ------------- ------------ ----------- -------------- Total investment income* ..................................... 1,947,829 169,231 4,122,191 1,073,429 ------------- ------------ ----------- -------------- EXPENSES: Management fees ............................................. 874,213 85,439 2,728,087 385,237 Administration fees ......................................... 45,625 24,592 95,058 32,585 Distribution fees (Open Shares) ............................. 68,729 8,439 86,085 5,120 Custodian fees .............................................. 48,359 29,534 89,347 66,304 Professional services ....................................... 19,402 16,966 25,085 17,876 Registration fees ........................................... 14,194 10,383 20,693 10,379 Shareholders' services ...................................... 33,321 24,604 46,964 24,527 Directors' fees and expenses ................................ 6,637 585 20,584 2,868 Shareholders' reports ....................................... 5,789 1,890 11,853 1,228 Amortization of organizational and offering expenses ........ -- 2,395 -- -- Other ....................................................... 5,084 1,106 14,397 2,639 ------------- ------------ ----------- -------------- Total expenses before fees waived and expenses reimbursed .... 1,121,353 205,933 3,138,153 548,763 Management fees waived and expenses reimbursed .............. -- (76,135) -- (10,160) Administration fees waived .................................. -- -- -- -- Expense reductions .......................................... (46) (60) (12,488) (130) ------------- ------------ ----------- -------------- Expenses--net ................................................ 1,121,307 129,738 3,125,665 538,473 ------------- ------------ ----------- -------------- INVESTMENT INCOME (LOSS)--NET ................................ 826,522 39,493 996,526 534,956 ------------- ------------ ----------- -------------- REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS AND FOREIGN CURRENCY--NET Realized gain (loss) on: Investments--net** ......................................... 5,724,418 2,333,160 52,748,116 (3,042,373) Foreign currency--net ...................................... -- -- -- (47,312) Change in net unrealized appreciation (depreciation) on: Investments--net ........................................... (2,732,932) (284,270) 9,504,901 (6,230,073) Foreign currency--net ...................................... -- -- -- (4,321) ------------- ------------ ----------- -------------- REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS AND FOREIGN CURRENCY--NET ....................................... 2,991,486 2,048,890 62,253,017 (9,324,079) ------------- ------------ ----------- -------------- NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS ............................................. $ 3,818,008 $ 2,088,383 $63,249,543 $ (8,789,123) ============= ============ =========== ============== *Net of foreign withholding taxes of ......................... $ -- $ -- $ -- $ 99,927 ============= ============ =========== ============== **Net of foreign capital gains taxes of ...................... $ -- $ -- $ -- $ -- ============= ============ =========== ==============
***Portfolio commenced operations on May 31, 2001. THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS. 68 ================================================================================ --------------------------------------------------------------------------------
LAZARD LAZARD LAZARD LAZARD INTERNATIONAL INTERNATIONAL EMERGING INTERNATIONAL EQUITY SMALL CAP MARKETS EQUITY SELECT PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO*** ----------------- ----------------- ---------------- --------------- $ 2,061,143 $ 371,519 $ 490,383 $ 260 31,967,546 5,022,511 3,676,338 535 -------------- --------------- -------------- ----------- 34,028,689 5,394,030 4,166,721 795 -------------- --------------- -------------- ----------- 10,679,289 1,218,430 1,649,356 213 214,282 54,803 55,299 3,755 185,670 2,429 6,787 2 1,545,332 236,334 359,426 3,055 48,570 20,306 20,303 2,842 27,795 13,410 15,815 1,198 68,537 27,876 29,950 6,313 81,025 8,743 9,036 2 22,161 3,109 3,734 36 -- -- -- 117 54,076 6,567 6,520 888 -------------- --------------- -------------- ----------- 12,926,737 1,592,007 2,156,226 18,421 -- (10,078) (11,832) (14,380) -- -- -- (3,750) (1,857) -- (224) -- -------------- --------------- -------------- ----------- 12,924,880 1,581,929 2,144,170 291 -------------- --------------- -------------- ----------- 21,103,809 3,812,101 2,022,551 504 -------------- --------------- -------------- ----------- (2,103,256) (8,156,250) (20,386,258) -- (5,662,625) (164,343) (428,887) -- (440,216,897) (4,758,174) 19,928,344 (10,504) (175,319) 62,250 (22,028) -- -------------- --------------- -------------- ----------- (448,158,097) (13,016,517) (908,829) (10,504) -------------- --------------- -------------- ----------- $ (427,054,288) $ (9,204,416) $ 1,113,722 $ (10,000) ============== =============== ============== =========== $ 5,099,666 $ 674,854 $ 469,286 $ 87 ============== =============== ============== =========== $ -- $ -- $ -- $ -- ============== =============== ============== =========== LAZARD LAZARD LAZARD LAZARD INTERNATIONAL STRATEGIC LAZARD BOND HIGH YIELD FIXED-INCOME YIELD MORTGAGE PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO ------------- ---------------- --------------- ---------------- ------------ $2,020,235 $ 4,438,277 $ 1,904,762 $ 8,721,971 $ 188,028 -- 293,104 786 208,178 -- ---------- --------------- ------------ --------------- --------- 2,020,235 4,731,381 1,905,548 8,930,149 188,028 ---------- --------------- ------------ --------------- --------- 153,583 278,180 297,582 898,978 13,185 28,461 29,732 30,249 46,388 19,409 12,908 16,265 28,296 10,185 -- 43,600 37,635 74,189 100,191 8,861 17,519 17,603 17,678 19,730 16,848 14,319 11,401 12,351 15,673 3,404 26,147 23,374 25,474 29,154 9,884 1,770 2,182 2,226 6,632 301 2,250 712 1,278 3,976 53 -- 2,395 -- -- 683 1,941 2,153 2,117 5,230 668 ---------- --------------- ------------ --------------- --------- 302,498 421,632 491,440 1,136,137 73,296 (12,718) (123,924) (29,525) -- (32,602) -- -- -- -- (18,750) -- -- -- (7,630) (518) ---------- --------------- ------------ --------------- --------- 289,780 297,708 461,915 1,128,507 21,426 ---------- --------------- ------------ --------------- --------- 1,730,455 4,433,673 1,443,633 7,801,642 166,602 ---------- --------------- ------------ --------------- --------- 491,212 (8,152,518) (87,368) (7,996,320) 40,353 -- -- (299,959) 1,512,466 -- (42,271) 6,786,901 (5,838,251) 3,507,618 (23,683) -- -- (775,564) 3,439,449 -- ---------- --------------- ------------ --------------- --------- 448,941 (1,365,617) (7,001,142) 463,213 16,670 ---------- --------------- ------------ --------------- --------- $2,179,396 $ 3,068,056 $ (5,557,509) $ 8,264,855 $ 183,272 ========== =============== ============ =============== ========= $ -- $ -- $ -- $ 9,651 $ -- ========== =============== ============ =============== ========= $ -- $ -- $ 2,984 $ 64,693 $ -- ========== =============== ============ =============== =========
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS. 69 ================================================================================ THE LAZARD FUNDS, INC. STATEMENTS OF CHANGES IN NET ASSETS --------------------------------------------------------------------------------
LAZARD EQUITY PORTFOLIO ------------------------------------- SIX MONTHS ENDED YEAR ENDED JUNE 30, 2001 DECEMBER 31, (UNAUDITED) 2000 ------------------ ---------------- INCREASE (DECREASE) IN NET ASSETS: OPERATIONS: Investment income (loss)--net .................................................. $ 826,522 $ 2,673,847 Realized gain (loss) on investments and foreign currency--net .................. 5,724,418 57,395,103 Change in unrealized appreciation (depreciation)--net .......................... (2,732,932) (72,695,600) ------------- -------------- Net increase (decrease) in net assets resulting from operations ................. 3,818,008 (12,626,650) ------------- -------------- DISTRIBUTIONS TO SHAREHOLDERS: From investment income--net Institutional Shares .......................................................... -- (2,231,410) Open Shares ................................................................... -- (534,416) From realized gains--net Institutional Shares .......................................................... -- (34,523,152) Open Shares ................................................................... -- (11,843,078) In excess of investment income--net Institutional Shares .......................................................... -- (16,449) Open Shares ................................................................... -- (3,939) In excess of realized gains--net Institutional Shares .......................................................... -- -- Open Shares ................................................................... -- -- ------------- -------------- Net decrease in net assets resulting from distributions ......................... -- (49,152,444) ------------- -------------- CAPITAL STOCK TRANSACTIONS: Net proceeds from sales Institutional Shares .......................................................... 10,610,989 61,385,178 Open Shares ................................................................... 6,429,144 27,266,542 Net proceeds from reinvestment of distributions Institutional Shares .......................................................... -- 35,428,274 Open Shares ................................................................... -- 12,240,399 Cost of shares redeemed Institutional Shares .......................................................... (33,145,862) (240,500,025) Open Shares ................................................................... (23,283,888) (84,011,522) ------------- -------------- Net increase (decrease) in net assets from capital stock transactions ........... (39,389,617) (188,191,154) ------------- -------------- Total increase (decrease) in net assets ......................................... (35,571,609) (249,970,248) Net assets at beginning of period ............................................... 249,683,585 499,653,833 ------------- -------------- Net assets at end of period* .................................................... $ 214,111,976 $ 249,683,585 ============= ============== SHARES ISSUED AND REPURCHASED: INSTITUTIONAL SHARES: Shares outstanding at beginning of period ...................................... 11,217,212 17,915,506 ------------- -------------- Shares sold .................................................................... 620,088 3,066,282 Shares issued to shareholders from reinvestment of distributions ............... -- 2,103,844 Shares repurchased ............................................................. (1,959,687) (11,868,420) ------------- -------------- Net increase (decrease) ........................................................ (1,339,599) (6,698,294) ------------- -------------- Shares outstanding at end of period ............................................ 9,877,613 11,217,212 ============= ============== OPEN SHARES: Shares outstanding at beginning of period ...................................... 3,722,698 5,796,320 ------------- -------------- Shares sold .................................................................... 381,808 1,349,595 Shares issued to shareholders from reinvestment of distributions ............... -- 723,431 Shares repurchased ............................................................. (1,361,867) (4,146,648) ------------- -------------- Net increase (decrease) ........................................................ (980,059) (2,073,622) ------------- -------------- Shares outstanding at end of period ............................................ 2,742,639 3,722,698 ============= ============== *Includes undistributed (distributions in excess of) investment income--net ..... $ 826,522 $ -- ============= ==============
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS. 70 ================================================================================ --------------------------------------------------------------------------------
LAZARD MID CAP PORTFOLIO LAZARD SMALL CAP PORTFOLIO LAZARD GLOBAL EQUITY PORTFOLIO ---------------------------------------- ---------------------------------------- -------------------------------------- SIX MONTHS ENDED SIX MONTHS ENDED SIX MONTHS ENDED JUNE 30, 2001 YEAR ENDED JUNE 30, 2001 YEAR ENDED JUNE 30, 2001 YEAR ENDED (UNAUDITED) DECEMBER 31, 2000 (UNAUDITED) DECEMBER 31, 2000 (UNAUDITED) DECEMBER 31, 2000 ------------------ ------------------- ------------------ ------------------- ----------------- ------------------ $ 39,493 $ 33,746 $ 996,526 $ 4,373,558 $ 534,956 $ 621,601 2,333,160 1,926,999 52,748,116 (2,188,363) (3,089,685) 3,772,209 (284,270) 3,016,366 9,504,901 123,418,898 (6,234,394) (13,498,718) ------------- --------------- -------------- -------------- --------------- --------------- 2,088,383 4,977,111 63,249,543 125,604,093 (8,789,123) (9,104,908) ------------- --------------- -------------- -------------- --------------- --------------- -- (33,230) -- (10,388,013) -- (575,574) -- (516) -- (532,442) -- (11,974) -- (2,769,172) -- (38,162,495) -- (3,980,195) -- (836,056) -- (2,720,892) -- (187,255) -- (12,330) -- -- -- -- -- (192) -- -- -- -- -- -- -- (110) -- (1,364,417) -- -- -- (8) -- (64,191) ------------- --------------- -------------- -------------- --------------- --------------- -- (3,651,496) -- (51,803,960) -- (6,183,606) ------------- --------------- -------------- -------------- --------------- --------------- 1,333,221 4,440,827 120,973,541 461,592,135 71,305 58,276,470 1,987,750 3,970,363 37,074,829 89,818,313 25,000 1,044,736 -- 2,330,690 -- 42,677,429 -- 5,856,440 -- 705,002 -- 3,220,070 -- 211,837 (1,441,936) (19,643,155) (292,324,902) (748,772,609) (1,137,577) (8,488,632) (1,667,629) (12,988,297) (37,208,168) (117,797,644) (507,156) (2,056,550) ------------- --------------- -------------- -------------- --------------- --------------- 211,406 (21,184,570) (171,484,700) (269,262,306) (1,548,428) 54,844,301 ------------- --------------- -------------- -------------- --------------- --------------- 2,299,789 (19,858,955) (108,235,157) (195,462,173) (10,337,551) 39,555,787 21,685,896 41,544,851 797,895,686 993,357,859 109,374,647 69,818,860 ------------- --------------- -------------- -------------- --------------- --------------- $ 23,985,685 $ 21,685,896 $ 689,660,529 $ 797,895,686 $ 99,037,096 $ 109,374,647 ============== =============== ============== ============== =============== =============== 1,350,976 2,553,780 40,414,908 54,749,412 8,445,174 4,366,106 -------------- --------------- -------------- -------------- --------------- --------------- 117,338 392,767 6,605,511 27,339,672 6,034 4,239,184 -- 229,218 -- 2,550,600 -- 478,921 (122,628) (1,824,789) (15,839,750) (44,224,776) (91,741) (639,037) -------------- --------------- -------------- -------------- --------------- --------------- (5,290) (1,202,804) (9,234,239) (14,334,504) (85,707) 4,079,068 -------------- --------------- -------------- -------------- --------------- --------------- 1,345,686 1,350,976 31,180,669 40,414,908 8,359,467 8,445,174 ============== =============== ============== ============== =============== =============== 561,206 1,306,121 3,753,674 5,233,657 369,340 430,069 -------------- --------------- -------------- -------------- --------------- --------------- 174,970 372,166 2,013,203 5,305,280 2,040 75,852 -- 69,868 -- 193,580 -- 17,215 (143,354) (1,186,949) (2,035,585) (6,978,843) (42,148) (153,796) -------------- --------------- -------------- -------------- --------------- --------------- 31,616 (744,915) (22,382) (1,479,983) (40,108) (60,729) -------------- --------------- -------------- -------------- --------------- --------------- 592,822 561,206 3,731,292 3,753,674 329,232 369,340 ============== =============== ============== ============== =============== =============== $ 39,493 $ -- $ 1,234,039 $ 237,513 $ 507,626 $ (27,330) ============== =============== ============== ============== =============== ===============
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS. 71 ================================================================================ THE LAZARD FUNDS, INC. STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED) --------------------------------------------------------------------------------
LAZARD INTERNATIONAL EQUITY PORTFOLIO ---------------------------------------- SIX MONTHS ENDED YEAR ENDED JUNE 30, 2001 DECEMBER 31, (UNAUDITED) 2000 ------------------ ------------------- INCREASE (DECREASE) IN NET ASSETS: OPERATIONS: Investment income (loss)--net ................................................... $ 21,103,809 $ 32,069,212 Realized gain (loss) on investments and foreign currency--net ................... (7,765,881) 351,826,328 Change in unrealized appreciation (depreciation)--net ........................... (440,392,216) (756,978,908) ---------------- ---------------- Net increase (decrease) in net assets resulting from operations .................. (427,054,288) (373,083,368) ---------------- ---------------- DISTRIBUTIONS TO SHAREHOLDERS: From investment income--net Institutional Shares ........................................................... -- (34,532,302) Open Shares .................................................................... -- (1,430,879) From realized gains--net Institutional Shares ........................................................... -- (352,683,226) Open Shares .................................................................... -- (17,721,930) In excess of realized gains--net Institutional Shares ........................................................... -- -- Open Shares .................................................................... -- -- ---------------- ---------------- Net decrease in net assets resulting from distributions .......................... -- (406,368,337) ---------------- ---------------- CAPITAL STOCK TRANSACTIONS: Net proceeds from sales Institutional Shares ........................................................... 1,169,074,924 2,499,587,908 Open Shares .................................................................... 360,290,339 425,016,149 Net proceeds from reinvestment of distributions Institutional Shares ........................................................... -- 365,319,055 Open Shares .................................................................... -- 16,449,785 Cost of shares redeemed Institutional Shares ........................................................... (1,280,023,858) (2,701,895,463) Open Shares .................................................................... (337,599,327) (398,090,043) ---------------- ---------------- Net increase (decrease) in net assets from capital stock transactions ............ (88,257,922) 206,387,391 ---------------- ---------------- Total increase (decrease) in net assets .......................................... (515,312,210) (573,064,314) Net assets at beginning of period ................................................ 3,149,159,500 3,722,223,814 ---------------- ---------------- Net assets at end of period* ..................................................... $ 2,633,847,290 $ 3,149,159,500 ================ ================ SHARES ISSUED AND REPURCHASED: INSTITUTIONAL SHARES: Shares outstanding at beginning of period ....................................... 223,097,242 207,337,268 ---------------- ---------------- Shares sold ..................................................................... 94,311,158 161,834,339 Shares issued to shareholders from reinvestment of distributions ................ -- 26,927,629 Shares repurchased .............................................................. (103,108,711) (173,001,994) ---------------- ---------------- Net increase (decrease) ......................................................... (8,797,553) 15,759,974 ---------------- ---------------- Shares outstanding at end of period ............................................. 214,299,689 223,097,242 ================ ================ OPEN SHARES: Shares outstanding at beginning of period ....................................... 10,976,004 7,994,053 ---------------- ---------------- Shares sold ..................................................................... 29,229,560 27,888,419 Shares issued to shareholders from reinvestment of distributions ................ -- 1,217,140 Shares repurchased .............................................................. (27,317,150) (26,123,608) ---------------- ---------------- Net increase (decrease) ......................................................... 1,912,410 2,981,951 ---------------- ---------------- Shares outstanding at end of period ............................................. 12,888,414 10,976,004 ================ ================ *Includes undistributed (distributions in excess of) investment income--net ..... $ 6,154,110 $ (14,949,699) ================ ================
** Portfolio commenced operations on May 31, 2001. THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS. 72 ================================================================================ --------------------------------------------------------------------------------
LAZARD INTERNATIONAL SMALL CAP PORTFOLIO LAZARD EMERGING MARKETS PORTFOLIO LAZARD INTERNATIONAL EQUITY SELECT PORTFOLIO** ------------------------------------- ------------------------------------ ----------------------------------------------- SIX MONTHS ENDED YEAR ENDED SIX MONTHS ENDED YEAR ENDED PERIOD ENDED JUNE 30, 2001 DECEMBER 31, JUNE 30, 2001 DECEMBER 31, JUNE 30, 2001 (UNAUDITED) 2000 (UNAUDITED) 2000 (UNAUDITED) ------------------ ------------------ ------------------ ----------------- ----------------------------------------------- $ 3,812,101 $ 3,311,114 $ 2,022,551 $ 2,325,246 $ 504 (8,320,593) 9,285,874 (20,815,145) 6,299,970 -- (4,695,924) (24,600,800) 19,906,316 (134,788,589) (10,504) ---------------- ---------------- -------------- -------------- --------------- (9,204,416) (12,003,812) 1,113,722 (126,163,373) (10,000) ---------------- ---------------- -------------- -------------- --------------- -- (2,695,984) -- (821,557) -- -- (5,161) -- -- -- -- (11,427,142) -- -- -- -- (62,848) -- -- -- -- (7,416,389) -- -- -- -- (40,790) -- -- -- ---------------- ---------------- -------------- -------------- --------------- -- (21,648,314) -- (821,557) -- ---------------- ---------------- -------------- -------------- --------------- 93,093,203 315,369,343 209,603,273 391,151,848 342,541 40,957,391 9,859,578 14,365,424 1,805,250 10,000 -- 20,585,318 -- 750,606 -- -- 106,983 -- -- -- (98,051,244) (178,275,031) (182,895,597) (415,547,373) (106) (39,374,452) (10,662,003) (12,165,873) (3,794,685) -- ---------------- ---------------- -------------- -------------- --------------- (3,375,102) 156,984,188 28,907,227 (25,634,354) 352,435 ---------------- ---------------- -------------- -------------- --------------- (12,579,518) 123,332,062 30,020,949 (152,619,284) 342,435 343,457,096 220,125,034 323,149,745 475,769,029 -- ---------------- ---------------- -------------- -------------- --------------- $ 330,877,578 $ 343,457,096 $ 353,170,694 $ 323,149,745 $ 342,435 ================ ================ ============== ============== =============== 27,193,777 15,418,580 42,246,142 43,466,805 -- ---------------- ---------------- -------------- -------------- --------------- 7,580,589 22,800,776 27,409,107 42,815,951 34,305 -- 1,661,402 -- 98,259 -- (7,944,424) (12,686,981) (23,917,808) (44,134,873) (10) ---------------- ---------------- -------------- -------------- --------------- (363,835) 11,775,197 3,491,299 (1,220,663) 34,295 ---------------- ---------------- -------------- -------------- --------------- 26,829,942 27,193,777 45,737,441 42,246,142 34,295 ================ ================ ============== ============== =============== 131,623 173,602 724,435 977,024 -- ---------------- ---------------- -------------- -------------- --------------- 3,320,654 755,609 1,898,296 185,304 1,000 -- 8,621 -- -- -- (3,183,425) (806,209) (1,594,198) (437,893) -- ---------------- ---------------- -------------- -------------- --------------- 137,229 (41,979) 304,098 (252,589) 1,000 ---------------- ---------------- -------------- -------------- --------------- 268,852 131,623 1,028,533 724,435 1,000 ================ ================ ============== ============== =============== $ 3,797,741 $ (14,360) $ 2,459,645 $ 437,094 $ 504 ================ ================ ============== ============== ===============
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS. 73 ================================================================================ THE LAZARD FUNDS, INC. STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED) --------------------------------------------------------------------------------
LAZARD BOND PORTFOLIO ------------------------------------ SIX MONTHS ENDED JUNE 30, 2001 YEAR ENDED (UNAUDITED) DECEMBER 31, 2000 ----------------- ------------------ INCREASE (DECREASE) IN NET ASSETS: OPERATIONS: Investment income (loss)--net .................................................. $ 1,730,455 $ 5,125,720 Realized gain (loss) on investments and foreign currency--net .................. 491,212 (2,622,044) Change in unrealized appreciation (depreciation)--net .......................... (42,271) 2,696,711 ------------- -------------- Net increase (decrease) in net assets resulting from operations ................. 2,179,396 5,200,387 ------------- -------------- DISTRIBUTIONS TO SHAREHOLDERS: From investment income--net Institutional Shares .......................................................... (1,447,964) (4,464,115) Open Shares ................................................................... (282,414) (645,952) In excess of investment income--net Institutional Shares .......................................................... -- (7,849) Open Shares ................................................................... -- (1,136) From capital--net Institutional Shares .......................................................... -- -- Open Shares ................................................................... -- -- ------------- -------------- Net decrease in net assets resulting from distributions ......................... (1,730,378) (5,119,052) ------------- -------------- CAPITAL STOCK TRANSACTIONS: Net proceeds from sales Institutional Shares .......................................................... 26,896,094 67,422,399 Open Shares ................................................................... 71,587,591 19,635,208 Net proceeds from reinvestment of distributions Institutional Shares .......................................................... 1,269,966 3,918,798 Open Shares ................................................................... 202,332 581,833 Cost of shares redeemed Institutional Shares .......................................................... (38,616,749) (108,057,252) Open Shares ................................................................... (74,079,157) (20,439,987) ------------- -------------- Net increase (decrease) in net assets from capital stock transactions ........... (12,739,923) (36,939,001) ------------- -------------- Total increase (decrease) in net assets ......................................... (12,290,905) (36,857,666) Net assets at beginning of period ............................................... 66,304,412 103,162,078 ------------- -------------- Net assets at end of period* .................................................... $ 54,013,507 $ 66,304,412 ============= ============== SHARES ISSUED AND REPURCHASED: INSTITUTIONAL SHARES: Shares outstanding at beginning of period ...................................... 5,852,741 9,853,933 ------------- -------------- Shares sold .................................................................... 2,831,124 7,296,990 Shares issued to shareholders from reinvestment of distributions ............... 134,007 425,174 Shares repurchased ............................................................. (4,072,026) (11,723,356) ------------- -------------- Net increase (decrease) ........................................................ (1,106,895) (4,001,192) ------------- -------------- Shares outstanding at end of period ............................................ 4,745,846 5,852,741 ============= ============== OPEN SHARES: Shares outstanding at beginning of period ...................................... 1,222,954 1,248,705 ------------- -------------- Shares sold .................................................................... 7,562,295 2,118,772 Shares issued to shareholders from reinvestment of distributions ............... 21,358 63,104 Shares repurchased ............................................................. (7,833,233) (2,207,627) ------------- -------------- Net increase (decrease) ........................................................ (249,580) (25,751) ------------- -------------- Shares outstanding at end of period ............................................ 973,374 1,222,954 ============= ============== *Includes undistributed (distributions in excess of) investment income--net ..... $ (160,907) $ (160,984) ============= ==============
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS. 74 ================================================================================ --------------------------------------------------------------------------------
LAZARD INTERNATIONAL FIXED-INCOME LAZARD HIGH YIELD PORTFOLIO PORTFOLIO LAZARD STRATEGIC YIELD PORTFOLIO -------------------------------------- -------------------------------------- ------------------------------------- SIX MONTHS ENDED SIX MONTHS ENDED SIX MONTHS ENDED JUNE 30, 2001 YEAR ENDED JUNE 30, 2001 YEAR ENDED JUNE 30, 2001 YEAR ENDED (UNAUDITED) DECEMBER 31, 2000 (UNAUDITED) DECEMBER 31, 2000 (UNAUDITED) DECEMBER 31, 2000 ------------------ ------------------- ------------------ ------------------- ------------------ ------------------ $ 4,433,673 $ 11,441,269 $ 1,443,633 $ 2,850,344 $ 7,801,642 $ 20,396,733 (8,152,518) (15,237,238) (387,327) (5,092,537) (6,483,854) (11,091,601) 6,786,901 (11,917,431) (6,613,815) (1,201,237) 6,947,067 (5,130,833) ------------- --------------- ------------- ------------- --------------- ---------------- 3,068,056 (15,713,400) (5,557,509) (3,443,430) 8,264,855 4,174,299 ------------- --------------- ------------- ------------- --------------- ---------------- (3,655,854) (9,618,423) (365,552) -- (7,569,729) (24,763,188) (754,810) (1,823,113) (147,289) -- (243,553) (1,105,033) -- -- -- -- -- (5,394,953) -- -- -- -- -- (240,745) -- -- -- (812,428) -- -- -- -- -- (143,218) -- -- ------------- --------------- ------------- ------------- --------------- ---------------- (4,410,664) (11,441,536) (512,841) (955,646) (7,813,282) (31,503,919) ------------- --------------- ------------- ------------- --------------- ---------------- 11,427,506 25,318,514 4,646,172 10,333,776 50,545,349 72,949,621 2,027,608 18,463,169 494,239 22,829,224 4,056,190 26,149,984 3,426,658 9,384,119 362,960 801,686 7,104,236 27,375,427 735,778 1,532,612 147,150 143,376 192,839 1,089,388 (23,989,936) (30,149,120) (11,401,033) (17,371,090) (76,681,978) (140,214,583) (4,628,021) (3,060,285) (351,434) (3,272,741) (6,448,032) (32,376,702) -------------- --------------- ------------- ------------- --------------- ---------------- (11,000,407) 21,489,009 (6,101,946) 13,464,231 (21,231,396) (45,026,865) -------------- --------------- ------------- ------------- --------------- ---------------- (12,343,015) (5,665,927) (12,172,296) 9,065,155 (20,779,823) (72,356,485) 79,303,843 84,969,770 86,719,042 77,653,887 249,794,806 322,151,291 -------------- --------------- ------------- ------------- --------------- ---------------- $ 66,960,828 $ 79,303,843 $ 74,546,746 $ 86,719,042 $ 229,014,983 $ 249,794,806 ============== =============== ============= ============= =============== ================ 10,008,954 9,535,605 6,606,781 7,252,221 30,161,493 34,670,734 -------------- --------------- ------------- ------------- --------------- ---------------- 1,678,018 3,514,904 494,642 1,072,625 6,278,766 8,430,468 507,740 1,219,224 39,367 84,099 885,459 3,278,451 (3,476,061) (4,260,779) (1,211,732) (1,802,164) (9,548,539) (16,218,160) -------------- --------------- ------------- ------------- --------------- ---------------- (1,290,303) 473,349 (677,723) (645,440) (2,384,314) (4,509,241) -------------- --------------- ------------- ------------- --------------- ---------------- 8,718,651 10,008,954 5,929,058 6,606,781 27,777,179 30,161,493 ============== =============== ============= ============= =============== ================ 2,061,919 148,700 2,444,698 372,893 1,209,528 1,816,497 -------------- --------------- ------------- ------------- --------------- ---------------- 292,192 2,162,719 52,863 2,395,420 503,806 3,087,124 108,972 205,098 16,085 15,312 24,023 129,992 (674,828) (454,598) (38,150) (338,927) (802,380) (3,824,085) -------------- --------------- ------------- ------------- --------------- ---------------- (273,664) 1,913,219 30,798 2,071,805 (274,551) (606,969) -------------- --------------- ------------- ------------- --------------- ---------------- 1,788,255 2,061,919 2,475,496 2,444,698 934,977 1,209,528 ============== =============== ============= ============= =============== ================ $ 23,009 $ -- $ 562,103 $ (368,689) $ (3,823,972) $ (3,812,332) ============== =============== ============= ============= =============== ================
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS. 75 ================================================================================ THE LAZARD FUNDS, INC. STATEMENTS OF CHANGES IN NET ASSETS (CONCLUDED) --------------------------------------------------------------------------------
LAZARD MORTGAGE PORTFOLIO -------------------------------------- SIX MONTHS ENDED JUNE 30, 2001 PERIOD ENDED (UNAUDITED) DECEMBER 31, 2000** ----------------- -------------------- INCREASE (DECREASE) IN NET ASSETS: OPERATIONS: Investment income (loss)--net .................................................. $ 166,602 $ 36 Realized gain (loss) on investments and foreign currency--net .................. 40,353 -- Change in unrealized appreciation (depreciation)--net .......................... (23,683) 45 ------------ -------- Net increase (decrease) in net assets resulting from operations ................. 183,272 81 ------------ -------- DISTRIBUTIONS TO SHAREHOLDERS: INSTITUTIONAL SHARES: From investment income--net .................................................... (166,602) (36) ------------ -------- Net decrease in net assets resulting from distributions ......................... (166,602) (36) ------------ -------- CAPITAL STOCK TRANSACTIONS: INSTITUTIONAL SHARES: Net proceeds from sales ........................................................ 7,125,224 100,000 Net proceeds from reinvestment of distributions ................................ 147,588 -- Cost of shares redeemed ........................................................ (1,612,587) -- ------------ -------- Net increase (decrease) in net assets from capital stock transactions ........... 5,660,225 100,000 ------------ -------- Total increase (decrease) in net assets ......................................... 5,676,895 100,045 Net assets at beginning of period ............................................... 100,045 -- ------------ -------- Net assets at end of period* .................................................... $ 5,776,940 $100,045 ============ ======== SHARES ISSUED AND REPURCHASED: INSTITUTIONAL SHARES: Shares outstanding at beginning of period ...................................... 10,000 -- ------------ -------- Shares sold .................................................................... 708,262 10,000 Shares issued to shareholders from reinvestment of distributions ............... 14,606 -- Shares repurchased ............................................................. (159,194) -- ------------ -------- Net increase (decrease) ........................................................ 563,674 10,000 ------------ -------- Shares outstanding at end of period ............................................ 573,674 10,000 ============ ======== *Includes undistributed (distributions in excess of) investment income--net ..... $ 11 $ 11 ============ ========
**Portfolio commenced operations on December 29, 2000. THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS. 76 ================================================================================ THE LAZARD FUNDS, INC. FINANCIAL HIGHLIGHTS SELECTED DATA FOR A SHARE OF CAPITAL STOCK OUTSTANDING THROUGHOUT EACH PERIOD: -------------------------------------------------------------------------------- LAZARD EQUITY PORTFOLIO
SIX MONTHS YEAR ENDED ENDED ------------------------------------------------------------------- 6/30/01+ 12/31/00 12/31/99 12/31/98 12/31/97 12/31/96 INSTITUTIONAL SHARES ------------- -------------- ------------ ------------ ------------ ------------- Net asset value, beginning of period ........ $ 16.72 $ 21.08 $21.75 $19.98 $19.24 $17.41 ------- ------- ------ ------ ------ ------ Income (loss) from investment operations: Net investment income (loss) (c) ........... 0.07 0.17 0.26 0.28 0.22 0.33 Net realized and unrealized gain (loss) .... 0.19 (0.79) 0.66 3.10 4.54 3.06 ------- ------- ------ ------ ------ ------ Total from investment operations ........... 0.26 (0.62) 0.92 3.38 4.76 3.39 ------- ------- ------ ------ ------ ------ Less distributions from and in excess of: Net investment income ...................... -- (0.23) ( 0.26) (0.26) (0.22) (0.33) Net realized gains ......................... -- (3.51) ( 1.33) (1.35) (3.80) (1.23) ------- ------- ------ ------ ------ ------ Total distributions ........................ -- (3.74) ( 1.59) (1.61) (4.02) (1.56) ------- ------- ------ ------ ------ ------ Net asset value, end of period .............. $ 16.98 $ 16.72 $21.08 $21.75 $19.98 $19.24 ======= ======= ====== ====== ====== ====== TOTAL RETURN (a) ............................ 1.5% (2.6)% 4.2% 17.3% 25.1% 19.9% RATIOS AND SUPPLEMENTAL DATA: Net assets, end of period (in thousands) .... $167,676 $187,517 $377,660 $361,126 $333,575 $278,605 Ratios to average net assets: Net expenses (b) ........................... 0.90% 0.86% 0.84% 0.85% 0.86% 0.89% Gross expenses (b) ......................... 0.90% 0.86% 0.84% 0.85% 0.87% 0.89% Net investment income (b) .................. 0.77% 0.85% 1.14% 1.28% 1.00% 1.87% Portfolio turnover rate ..................... 48% 36% 62% 76% 78% 66%
FOR THE SIX MONTHS YEAR ENDED PERIOD ENDED ------------------------------------------- 2/5/97* TO 6/30/01+ 12/31/00 12/31/99 12/31/98 12/31/97 OPEN SHARES ------------ ------------- ------------ ------------ ----------- Net asset value, beginning of period ............. $ 16.70 $ 21.05 $ 21.76 $ 19.99 $ 20.19 ------- ------- ------- ------- ------- Income (loss) from investment operations: Net investment income (loss) (c) ................ 0.04 0.12 0.20 0.20 0.13 Net realized and unrealized gain (loss) ......... 0.19 (0.79) 0.65 3.12 3.62 ------- ------- ------- ------- ------- Total from investment operations ................ 0.23 (0.67) 0.85 3.32 3.75 ------- ------- ------- ------- ------- Less distributions from and in excess of: Net investment income ........................... -- (0.17) (0.23) (0.20) (0.15) Net realized gains .............................. -- (3.51) (1.33) (1.35) (3.80) ------- ------- ------- ------- ------- Total distributions ............................. -- (3.68) (1.56) (1.55) (3.95) ------- ------- ------- ------- ------- Net asset value, end of period ................... $ 16.93 $ 16.70 $ 21.05 $ 21.76 $ 19.99 ======= ======= ======= ======= ======= TOTAL RETURN (a) ................................. 1.4% (2.9)% 3.9% 17.0% 18.9% RATIOS AND SUPPLEMENTAL DATA: Net assets, end of period (in thousands) ......... $46,436 $62,167 $121,994 $117,624 $22,811 Ratios to average net assets: Net expenses (b) ................................ 1.17% 1.13% 1.10% 1.12% 1.22% Gross expenses (b) .............................. 1.17% 1.13% 1.10% 1.12% 1.35% Net investment income (b) ....................... 0.50% 0.57% 0.89% 0.96% 0.60% Portfolio turnover rate .......................... 48% 36% 62% 76% 78%
SEE NOTES TO FINANCIAL HIGHLIGHTS. THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS. 77 ================================================================================ THE LAZARD FUNDS, INC. FINANCIAL HIGHLIGHTS (CONTINUED) SELECTED DATA FOR A SHARE OF CAPITAL STOCK OUTSTANDING THROUGHOUT EACH PERIOD: -------------------------------------------------------------------------------- LAZARD MID CAP PORTFOLIO
FOR THE SIX MONTHS YEAR ENDED PERIOD ENDED ------------------------------------------ 11/4/97* TO 6/30/01+ 12/31/00 12/31/99 12/31/98 12/31/97 INSTITUTIONAL SHARES ------------ ------------ ------------ ------------ ------------ Net asset value, beginning of period ............. $ 11.36 $ 10.78 $ 10.46 $ 10.26 $ 10.00 ------- ------- ------- ------- ------- Income (loss) from investment operations: Net investment income (loss) (c) ................ 0.03 0.02 0.02 0.05 0.02 Net realized and unrealized gain (loss) ......... 1.01 2.20 0.43 0.31 0.26 ------- ------- ------- ------- ------- Total from investment operations ................ 1.04 2.22 0.45 0.36 0.28 ------- ------- ------- ------- ------- Less distributions from and in excess of: Net investment income ........................... -- 0.03) (0.03) (0.05) (0.02) Net realized gains .............................. -- (1.61) (0.10) (0.11) -- ------- ------- ------- ------- ------- Total distributions ............................. -- (1.64) (0.13) (0.16) (0.02) ------- ------- ------- ------- ------- Net asset value, end of period ................... $ 12.40 $ 11.36 $ 10.78 $ 10.46 $ 10.26 ======= ======= ======= ======= ======= TOTAL RETURN (a) ................................. 9.2% 22.4% 4.4% 3.7% 2.8% RATIOS AND SUPPLEMENTAL DATA: Net assets, end of period (in thousands) ......... $16,684 $15,344 $27,521 $55,731 $49,779 Ratios to average net assets: Net expenses (b) ................................ 1.05% 1.05% 1.05% 1.05% 1.05% Gross expenses (b) .............................. 1.68% 1.50% 1.17% 1.23% 1.44% Net investment income (b) ....................... 0.44% 0.20% 0.23% 0.48% 1.02% Portfolio turnover rate .......................... 79% 152% 113% 86% 1%
FOR THE SIX MONTHS YEAR ENDED PERIOD ENDED ------------------------------------------ 11/4/97* TO 6/30/01+ 12/31/00 12/31/99 12/31/98 12/31/97 OPEN SHARES ------------ ------------ ------------ ------------ ------------ Net asset value, beginning of period ............. $ 11.30 $ 10.74 $ 10.45 $ 10.26 $ 10.00 ------- ------- ------- ------- ------- Income (loss) from investment operations: Net investment income (loss) (c) ................ 0.01 (0.01) (0.01) 0.02 0.01 Net realized and unrealized gain (loss) ......... 1.01 2.18 0.42 0.32 0.26 ------- ------- ------- ------- ------- Total from investment operations ................ 1.02 2.17 0.41 0.34 0.27 ------- ------- ------- ------- ------- Less distributions from and in excess of: Net investment income ........................... -- -- (0.02) (0.04) (0.01) Net realized gains .............................. -- (1.61) (0.10) (0.11) -- ------- ------- ------- ------- ------- Total distributions ............................. -- (1.61) (0.12) (0.15) (0.01) ------- ------- ------- ------- ------- Net asset value, end of period ................... $ 12.32 $ 11.30 $ 10.74 $ 10.45 $ 10.26 ======= ======= ======= ======= ======= TOTAL RETURN (a) ................................. 9.0% 22.0% 4.0% 3.4% 2.7% RATIOS AND SUPPLEMENTAL DATA: Net assets, end of period (in thousands) ......... $ 7,302 $ 6,342 $14,024 $16,345 $1,806 Ratios to average net assets: Net expenses (b) ................................ 1.35% 1.35% 1.35% 1.35% 1.35% Gross expenses (b) .............................. 2.10% 1.91% 1.55% 1.66% 4.97% Net investment income (loss) (b) ................ 0.13% (0.09)% (0.08)% 0.29% 0.72% Portfolio turnover rate .......................... 79% 152% 113% 86% 1%
SEE NOTES TO FINANCIAL HIGHLIGHTS. THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS. 78 ================================================================================ THE LAZARD FUNDS, INC. FINANCIAL HIGHLIGHTS (CONTINUED) SELECTED DATA FOR A SHARE OF CAPITAL STOCK OUTSTANDING THROUGHOUT EACH PERIOD: -------------------------------------------------------------------------------- LAZARD SMALL CAP PORTFOLIO
SIX MONTHS YEAR ENDED ENDED ----------------------------------------------------------------------- 6/30/01+ 12/31/00 12/31/99 12/31/98 12/31/97 12/31/96 INSTITUTIONAL SHARES ------------ ------------ ------------ --------------- --------------- ------------- Net asset value, beginning of period ...... $ 18.07 $ 16.57 $ 17.39 $ 20.02 $ 18.44 $ 15.95 ------- ------- ------- --------- --------- ------- Income (loss) from investment operations: Net investment income (loss) (c) ......... 0.03 0.09 0.10 0.08 0.07 0.11 Net realized and unrealized gain (loss) .. 1.66 2.45 0.17 (2.60) 4.92 3.68 ------- ------- ------- --------- --------- ------- Total from investment operations ......... 1.69 2.54 0.27 (2.52) 4.99 3.79 ------- ------- ------- --------- --------- ------- Less distributions from and in excess of: Net investment income .................... -- (0.23) (0.11) (0.01) (0.06) (0.11) Net realized gains ....................... -- (0.81) (0.98) (0.10) (3.35) (1.19) ------- ------- ------- --------- --------- ------- Total distributions ...................... -- (1.04) (1.09) (0.11) (3.41) (1.30) ------- ------- ------- --------- --------- ------- Net asset value, end of period ............ $19.76 $18.07 $16.57 $ 17.39 $ 20.02 $ 18.44 ======= ======= ======= ========= ========= ======= TOTAL RETURN (a) .......................... 9.4% 15.9% 1.8% (12.6)% 28.1% 23.9% RATIOS AND SUPPLEMENTAL DATA: Net assets, end of period (in thousands) .. $616,145 $730,179 $906,945 $1,411,503 $1,445,075 $981,405 Ratios to average net assets: Net expenses (b) ......................... 0.83% 0.83% 0.81% 0.81% 0.82% 0.84% Gross expenses (b) ....................... 0.83% 0.83% 0.81% 0.81% 0.82% 0.84% Net investment income (b) ................ 0.30% 0.52% 0.60% 0.50% 0.35% 0.60% Portfolio turnover rate ................... 41% 67% 50% 46% 56% 51%
FOR THE SIX MONTHS YEAR ENDED PERIOD ENDED ------------------------------------------ 1/30/97* TO 6/30/01+ 12/31/00 12/31/99 12/31/98 12/31/97 OPEN SHARES ------------ ------------ ------------ ------------ ------------ Net asset value, beginning of period ............. $ 18.04 $ 16.51 $ 17.35 $ 20.02 $ 18.75 ------- ------- ------- ------- ------- Income (loss) from investment operations: Net investment income (loss) (c) ................ -- 0.04 0.06 0.03 0.01 Net realized and unrealized gain (loss) ......... 1.66 2.45 0.16 (2.60) 4.61 ------- ------- ------- ------- ------- Total from investment operations ................ 1.66 2.49 0.22 2.57) 4.62 ------- ------- ------- ------- ------- Less distributions from and in excess of: Net investment income ........................... -- (0.15) (0.08) -- -- Net realized gains .............................. -- (0.81) (0.98) (0.10) (3.35) ------- ------- ------- ------- ------- Total distributions ............................. -- (0.96) (1.06) (0.10) (3.35) ------- ------- ------- ------- ------- Net asset value, end of period ................... $ 19.70 $ 18.04 $16.51 $17.35 $20.02 ======= ======= ======= ======= ======= TOTAL RETURN (a) ................................. 9.3% 15.6% 1.5% (12.9)% 25.6% RATIOS AND SUPPLEMENTAL DATA: Net assets, end of period (in thousands) ......... $73,516 $67,717 $86,413 $93,547 $46,097 Ratios to average net assets: Net expenses (b) ................................ 1.13% 1.12% 1.09% 1.09% 1.14% Gross expenses (b) .............................. 1.13% 1.12% 1.09% 1.09% 1.23% Net investment income (b) ....................... 0.01% 0.24% 0.33% 0.21% 0.12% Portfolio turnover rate .......................... 41% 67% 50% 46% 56%
SEE NOTES TO FINANCIAL HIGHLIGHTS. THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS. 79 ================================================================================ THE LAZARD FUNDS, INC. FINANCIAL HIGHLIGHTS (CONTINUED) SELECTED DATA FOR A SHARE OF CAPITAL STOCK OUTSTANDING THROUGHOUT EACH PERIOD: -------------------------------------------------------------------------------- LAZARD GLOBAL EQUITY PORTFOLIO
YEAR ENDED ----------------------------------------------------- FOR THE SIX MONTHS PERIOD ENDED 1/4/96* TO 6/30/01+ 12/31/00 12/31/99 12/31/98 12/31/97 12/31/96 INSTITUTIONAL SHARES -------------- -------------- ------------ ------------ ------------ ----------- Net asset value, beginning of period ....... $ 12.41 $ 14.56 $ 13.14 $ 11.91 $ 11.48 $ 10.00 -------- ------- ------- ------- ------- -------- Income (loss) from investment operations: Net investment income (loss) (c) .......... 0.06 0.09 0.19 0.10 0.14 0.09 Net realized and unrealized gain (loss) ... (1.07) (1.49) 1.95 1.90 1.58 1.49 --------- -------- ------- ------- ------- -------- Total from investment operations .......... (1.01) (1.40) 2.14 2.00 1.72 1.58 --------- -------- ------- ------- ------- -------- Less distributions from and in excess of: Net investment income ..................... -- (0.07) (0.21) (0.08) (0.15) (0.10) Net realized gains ........................ -- (0.68) (0.51) (0.69) (1.14) -- --------- -------- ------- ------- ------- -------- Total distributions ....................... -- (0.75) (0.72) (0.77) (1.29) (0.10) --------- -------- ------- ------- ------- -------- Net asset value, end of period ............. $ 11.40 $12.41 $14.56 $ 13.14 $ 11.91 $ 11.48 ========= ======== ======= ======= ======= ======== TOTAL RETURN (a) ........................... (8.1)% (9.5)% 16.4% 17.1% 15.3% 15.8% RATIOS AND SUPPLEMENTAL DATA: Net assets, end of period (in thousands) ... $ 95,287 $104,787 $63,557 $17,710 $10,359 $ 9,784 Ratios to average net assets: Net expenses (b) .......................... 1.04% 1.05% 1.05% 1.05% 1.05% 1.05% Gross expenses (b) ........................ 1.04% 1.06% 1.21% 2.18% 2.55% 5.06% Net investment income (b) ................. 1.06% 0.69% 1.35% 1.07% 1.02% 1.70% Portfolio turnover rate .................... 21% 47% 43% 48% 64% 74%
FOR THE SIX MONTHS YEAR ENDED PERIOD ENDED ------------------------------------------- 1/30/97* TO 6/30/01+ 12/31/00 12/31/99 12/31/98 12/31/97 OPEN SHARES -------------- ------------- ------------ ------------ ------------ Net asset value, beginning of period ............. $ 12.42 $14.56 $ 13.16 $ 11.92 $ 11.31 ------- ------- ------- ------- ------- Income (loss) from investment operations: Net investment income (loss) (c) ................ 0.04 0.06 0.13 0.09 0.08 Net realized and unrealized gain (loss) ......... (1.07) (1.49) 1.97 1.88 1.78 ------- ------- ------- ------- ------- Total from investment operations ................ (1.03) (1.43) 2.10 1.97 1.86 ------- ------- ------- ------- ------- Less distributions from and in excess of: Net investment income ........................... -- (0.03) (0.19) (0.04) ( 0.11) Net realized gains .............................. -- (0.68) (0.51) (0.69) ( 1.14) ------- ------- ------- ------- ------- Total distributions ............................. -- (0.71) (0.70) (0.73) ( 1.25) ------- ------- ------- ------- ------- Net asset value, end of period ................... $ 11.39 $ 12.42 $ 14.56 $ 13.16 $ 11.92 ======= ======= ======= ======= ======= TOTAL RETURN (a) ................................. (8.3)% (9.7)% 16.1% 16.8% 16.7% RATIOS AND SUPPLEMENTAL DATA: Net assets, end of period (in thousands) ......... $ 3,751 $ 4,588 $ 6,262 $ 4,824 $ 2,290 Ratios to average net assets: Net expenses (b) ................................ 1.35% 1.35% 1.35% 1.35% 1.35% Gross expenses (b) .............................. 1.85% 1.66% 1.80% 2.85% 4.23% Net investment income (b) ....................... 0.70% 0.42% 0.95% 0.77% 0.67% Portfolio turnover rate .......................... 21% 47% 43% 48% 64%
SEE NOTES TO FINANCIAL HIGHLIGHTS. THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS. 80 ================================================================================ THE LAZARD FUNDS, INC. FINANCIAL HIGHLIGHTS (CONTINUED) SELECTED DATA FOR A SHARE OF CAPITAL STOCK OUTSTANDING THROUGHOUT EACH PERIOD: -------------------------------------------------------------------------------- LAZARD INTERNATIONAL EQUITY PORTFOLIO
SIX MONTHS YEAR ENDED ENDED --------------------------------------------------------------------------- 6/30/01+ 12/31/00 12/31/99 12/31/98 12/31/97 12/31/96 INSTITUTIONAL SHARES ----------------------------- -------------- -------------- --------------- ------------- Net asset value, beginning of period .... $ 13.46 $ 17.29 $ 15.23 $ 13.97 $ 13.62 $ 12.50 --------- --------- --------- --------- --------- --------- Income (loss) from investment operations: Net investment income (loss) (c) ....... 0.09 0.15 0.34 0.18 0.22 0.17 Net realized and unrealized gain (loss) (1.95) (2.01) 3.25 2.03 1.40 1.76 --------- --------- --------- --------- --------- --------- Total from investment operations ....... (1.86) (1.86) 3.59 2.21 1.62 1.93 --------- --------- --------- --------- --------- --------- Less distributions from and in excess of: Net investment income .................. -- (0.17) (0.54) (0.14) (0.34) (0.19) Net realized gains ..................... -- (1.80) (0.99) (0.81) (0.93) (0.62) --------- --------- --------- --------- --------- --------- Total distributions .................... -- (1.97) (1.53) (0.95) (1.27) (0.81) --------- --------- --------- --------- --------- --------- Net asset value, end of period .......... $ 11.60 $ 13.46 $ 17.29 $ 15.23 $ 13.97 $ 13.62 ========= ========= ========= ========= ========= ========= TOTAL RETURN (a) ........................ (13.8)% (10.6)% 24.1% 16.0% 11.8% 15.6% RATIOS AND SUPPLEMENTAL DATA: Net assets, end of period (in thousands) $2,485,074 $3,001,933 $3,584,093 $2,879,289 $2,099,724 $1,816,173 Ratios to average net assets: Net expenses (b) ....................... 0.89% 0.88% 0.88% 0.90% 0.89% 0.91% Gross expenses (b) ..................... 0.89% 0.88% 0.88% 0.90% 0.89% 0.91% Net investment income (b) .............. 1.49% 0.97% 2.09% 1.37% 1.18% 1.93% Portfolio turnover rate ................. 29% 51% 35% 41% 37% 39%
FOR THE SIX MONTHS YEAR ENDED PERIOD ENDED ------------------------------------------ 1/23/97* TO 6/30/01+ 12/31/00 12/31/99 12/31/98 12/31/97 OPEN SHARES ------------ ------------ ------------ ------------ ------------ Net asset value, beginning of period ............. $ 13.41 $ 17.28 $ 15.23 $ 13.95 $ 13.29 ------- ------- ------- ------- ------- Income (loss) from investment operations: Net investment income (loss) (c) ................ 0.08 0.10 0.31 0.18 0.16 Net realized and unrealized gain (loss) ......... (1.95) (2.02) 3.22 2.00 1.71 ------- ------- ------- ------- ------- Total from investment operations ................ (1.87) (1.92) 3.53 2.18 1.87 ------- ------- ------- ------- ------- Less distributions from and in excess of: Net investment income ........................... -- (0.15) (0.49) (0.09) (0.28) Net realized gains .............................. -- (1.80) (0.99) (0.81) (0.93) ------- ------- ------- ------- ------- Total distributions ............................. -- (1.95) (1.48) (0.90) (1.21) ------- ------- ------- ------- ------- Net asset value, end of period ................... $ 11.54 $ 13.41 $ 17.28 $ 15.23 $ 13.95 ======= ======= ======= ======= ======= TOTAL RETURN (a) ................................. (13.9)% (11.0)% 23.7% 15.8% 14.1% RATIOS AND SUPPLEMENTAL DATA: Net assets, end of period (in thousands) ......... $148,773 $147,226 $138,131 $47,303 $10,794 Ratios to average net assets: Net expenses (b) ................................ 1.17% 1.15% 1.16% 1.24% 1.25% Gross expenses (b) .............................. 1.17% 1.15% 1.16% 1.24% 1.61% Net investment income (b) ....................... 1.27% 0.66% 1.87% 1.02% 0.37% Portfolio turnover rate .......................... 29% 51% 35% 41% 37%
SEE NOTES TO FINANCIAL HIGHLIGHTS. THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS. 81 ================================================================================ THE LAZARD FUNDS, INC. FINANCIAL HIGHLIGHTS (CONTINUED) SELECTED DATA FOR A SHARE OF CAPITAL STOCK OUTSTANDING THROUGHOUT EACH PERIOD: -------------------------------------------------------------------------------- LAZARD INTERNATIONAL SMALL CAP PORTFOLIO
SIX MONTHS YEAR ENDED ENDED ------------------------------------------------------------------ 6/30/01+ 12/31/00 12/31/99 12/31/98 12/31/97 12/31/96 INSTITUTIONAL SHARES -------------- ------------- ------------ ------------ ------------ ------------- Net asset value, beginning of period ...... $12.57 $ 14.12 $11.40 $11.69 $ 11.93 $ 10.52 -------- -------- ------- ------- ------- ------- Income (loss) from investment operations: Net investment income (loss) (c) ......... 0.14 0.16 0.14 0.05 0.07 0.08 Net realized and unrealized gain (loss) .. (0.50) (0.81) 2.81 0.83 (0.03) 1.55 -------- -------- ------- ------- ------- ------- Total from investment operations ......... (0.36) (0.65) 2.95 0.88 0.04 1.63 -------- -------- ------- ------- ------- ------- Less distributions from and in excess of: Net investment income .................... -- (0.11) (0.12) (0.05) (0.07) (0.08) Net realized gains ....................... -- (0.79) (0.11) (1.12) (0.21) (0.14) -------- -------- ------- ------- ------- ------- Total distributions ...................... -- (0.90) (0.23) (1.17) (0.28) s(0.22) -------- -------- ------- ------- ------- ------- Net asset value, end of period ............ $ 12.21 $12.57 $14.12 $11.40 $11.69 $ 11.93 ======== ======== ======= ======= ======= ======= TOTAL RETURN (a) .......................... (2.9)% (4.4)% 26.1% 7.6% 0.3% 15.6% RATIOS AND SUPPLEMENTAL DATA: Net assets, end of period (in thousands) .. $327,615 $341,808 $217,684 $177,779 $141,695 $126,973 Ratios to average net assets: Net expenses (b) ......................... 0.97% 0.98% 1.01% 1.04% 1.09% 1.12% Gross expenses (b) ....................... 0.97% 0.98% 1.01% 1.04% 1.09% 1.12% Net investment income (b) ................ 2.35% 1.13% 1.17% 0.81% 0.73% 1.67% Portfolio turnover rate ................... 5% 43% 50% 56% 63% 101%
FOR THE SIX MONTHS YEAR ENDED PERIOD ENDED --------------------------------------- 2/13/97* TO 6/30/01+ 12/31/00 12/31/99 12/31/98 12/31/97 OPEN SHARES -------------- ------------- ------------ ------------ -------------- Net asset value, beginning of period ............. $ 12.53 $ 14.06 $ 11.38 $ 11.69 $12.32 ------- ------- ------- ------- ------ Income (loss) from investment operations: Net investment income (loss) (c) ................ 0.14 0.10 0.09 0.01 (0.02 Net realized and unrealized gain (loss) ......... (0.53) (0.80) 2.80 0.83 (0.42) ------- ------- ------- ------- ------ Total from investment operations ................ (0.39) (0.70) 2.89 0.84 (0.40) ------- ------- ------- ------- ------ Less distributions from and in excess of: Net investment income ........................... -- (0.04) (0.10) (0.03) (0.02) Net realized gains .............................. -- (0.79) (0.11) (1.12) (0.21) ------- ------- ------- ------- ------ Total distributions ............................. -- (0.83) (0.21) (1.15) (0.23) ------- ------- ------- ------- ------ Net asset value, end of period ................... $12.14 $12.53 $14.06 $ 11.38 $11.69 ======= ======= ======= ======= ====== TOTAL RETURN (a) ................................. (3.1)% (4.9)% 25.6% 7.2% (3.2)% RATIOS AND SUPPLEMENTAL DATA: Net assets, end of period (in thousands) ......... $3,263 $1,649 $2,441 $2,646 $ 1,873 Ratios to average net assets: Net expenses (b) ................................ 1.43% 1.43% 1.43% 1.43% 1.43% Gross expenses (b) .............................. 2.47% 2.27% 2.12% 1.93% 3.39% Net investment income (b) ....................... 2.29% 0.68% 0.77% 0.43% 0.34% Portfolio turnover rate .......................... 5% 43% 50% 56% 63%
SEE NOTES TO FINANCIAL HIGHLIGHTS. THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS. 82 ================================================================================ THE LAZARD FUNDS, INC. FINANCIAL HIGHLIGHTS (CONTINUED) SELECTED DATA FOR A SHARE OF CAPITAL STOCK OUTSTANDING THROUGHOUT EACH PERIOD: -------------------------------------------------------------------------------- LAZARD EMERGING MARKETS PORTFOLIO
SIX MONTHS YEAR ENDED ENDED ------------------------------------------------------------------ 6/30/01+ 12/31/00 12/31/99 12/31/98 12/31/97 12/31/96 INSTITUTIONAL SHARES ------------- ------------ ------------ ------------ -------------- ------------ Net asset value, beginning of period ........ $ 7.52 $ 10.70 $ 6.94 $ 9.20 $ 11.21 $ 9.24 ------- ------- ------- ------- ------- ------- Income (loss) from investment operations: Net investment income (loss) (c) ........... 0.05 0.06 0.09 0.10 0.10 0.07 Net realized and unrealized gain (loss) .... (0.02) (3.22) 3.77 (2.26) (1.18) 2.11 ------- ------- ------- ------- ------- ------- Total from investment operations ........... 0.03 (3.16) 3.86 (2.16) (1.08) 2.18 ------- ------- ------- ------- ------- ------- Less distributions from and in excess of: Net investment income ...................... -- (0.02) (0.10) (0.10) (0.09) (0.08) Net realized gains ......................... -- -- -- -- (0.84) (0.13) ------- ------- ------- ------- ------- ------- Total distributions ........................ -- (0.02) (0.10) (0.10) (0.93) (0.21) ------- ------- ------- ------- ------- ------- Net asset value, end of period .............. $ 7.55 $7.52 $10.70 $ 6.94 $9.20 $11.21 ======= ======= ======= ======= ======= ======= TOTAL RETURN (a) ............................ 0.4% (29.5)% 55.8% (23.5)% (9.8)% 23.6% RATIOS AND SUPPLEMENTAL DATA: Net assets, end of period (in thousands) .... $345,399 $317,691 $465,278 $298,033 $236,340 $145,328 Ratios to average net assets: Net expenses (b) ........................... 1.29% 1.26% 1.24% 1.28% 1.32% 1.38% Gross expenses (b) ......................... 1.30% 1.27% 1.25% 1.29% 1.33% 1.48% Net investment income (b) .................. 1.23% 0.62% 1.05% 1.84% 1.26% 1.40% Portfolio turnover rate ..................... 20% 72% 46% 36% 40% 51%
FOR THE SIX MONTHS YEAR ENDED PERIOD ENDED ------------------------------------------ 3/5/97* TO 6/30/01+ 12/31/00 12/31/99 12/31/98 12/31/97 OPEN SHARES ------------ ------------ ------------ ------------ ----------- Net asset value, beginning of period ............. $ 7.54 $ 10.74 $ 6.97 $ 9.20 $11.45 ------- ------- ------- ------- ------ Income (loss) from investment operations: Net investment income (loss) (c) ................ 0.04 0.03 0.06 0.11 0.07 Net realized and unrealized gain (loss) ......... (0.02) (3.23) 3.79 (2.26) (1.42) ------- ------- ------- ------- ------ Total from investment operations ................ 0.02 (3.20) 3.85 (2.15) (1.35) ------- ------- ------- ------- ------ Less distributions from and in excess of: Net investment income ........................... -- -- (0.08) (0.08) (0.07) Net realized gains .............................. -- -- -- -- (0.83) ------- ------- ------- ------- ------ Total distributions ............................. -- -- (0.08) (0.08) (0.90) ------- ------- ------- ------- ------ Net asset value, end of period ................... $ 7.56 $ 7.54 $10.74 $ 6.97 $9.20 ======= ======= ======= ======= ====== TOTAL RETURN (a) ................................. 0.3% (29.8)% 55.3% (23.3)% (12.0)% RATIOS AND SUPPLEMENTAL DATA: Net assets, end of period (in thousands) ......... $ 7,771 $ 5,459 $10,491 $ 8,191 $ 7,769 Ratios to average net assets: Net expenses (b) ................................ 1.60% 1.60% 1.60% 1.60% 1.60% Gross expenses (b) .............................. 2.04% 1.80% 1.75% 1.76% 1.93% Net investment income (b) ....................... 0.98% 0.30% 0.73% 1.54% 1.01% Portfolio turnover rate .......................... 20% 72% 46% 36% 40%
SEE NOTES TO FINANCIAL HIGHLIGHTS. THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS. 83 ================================================================================ THE LAZARD FUNDS, INC. FINANCIAL HIGHLIGHTS (CONTINUED) SELECTED DATA FOR A SHARE OF CAPITAL STOCK OUTSTANDING THROUGHOUT THE PERIOD: -------------------------------------------------------------------------------- LAZARD INTERNATIONAL EQUITY SELECT PORTFOLIO
FOR THE PERIOD 5/31/01* TO 6/30/01+ INSTITUTIONAL SHARES -------------- Net asset value, beginning of period ............. $ 10.00 ------- Income (loss) from investment operations: Net investment income (loss) (c) ................ 0.02 Net realized and unrealized gain (loss) ......... (0.32) ------- Total from investment operations ................ (0.30) ------- Less distributions from and in excess of: Net investment income ........................... -- Net realized gains .............................. -- ------- Total distributions ............................. -- ------- Net asset value, end of period ................... $ 9.70 ======= TOTAL RETURN (a) ................................. (3.0)% RATIOS AND SUPPLEMENTAL DATA: Net assets, end of period (in thousands) ......... $ 333 Ratios to average net assets: Net expenses (b) ................................ 1.15% Gross expenses (b) .............................. 71.09% Net investment income (b) ....................... 2.02% Portfolio turnover rate .......................... 0%
FOR THE PERIOD 5/31/01* TO 6/30/01+ OPEN SHARES -------------- Net asset value, beginning of period ............. $ 10.00 ------- Income (loss) from investment operations: Net investment income (loss) (c) ................ 0.01 Net realized and unrealized gain (loss) ......... (0.31) ------- Total from investment operations ................ (0.30) ------- Less distributions from and in excess of: Net investment income ........................... -- Net realized gains .............................. -- ------- Total distributions ............................. -- ------- Net asset value, end of period ................... $ 9.70 ======= TOTAL RETURN (a) ................................. (3.0)% RATIOS AND SUPPLEMENTAL DATA: Net assets, end of period (in thousands) ......... $ 10 Ratios to average net assets: Net expenses (b) ................................ 1.45% Gross expenses (b) .............................. 140.58% Net investment income (b) ....................... 1.66% Portfolio turnover rate .......................... 0%
SEE NOTES TO FINANCIAL HIGHLIGHTS. THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS. 84 ================================================================================ THE LAZARD FUNDS, INC. FINANCIAL HIGHLIGHTS (CONTINUED) SELECTED DATA FOR A SHARE OF CAPITAL STOCK OUTSTANDING THROUGHOUT EACH PERIOD: -------------------------------------------------------------------------------- LAZARD BOND PORTFOLIO
SIX MONTHS YEAR ENDED ENDED ---------------------------------------------------------------- 6/30/01+ 12/31/00 12/31/99 12/31/98 12/31/97 12/31/96 INSTITUTIONAL SHARES ----------- ------------ ------------- ------------ ------------ ----------- Net asset value, beginning of period ............. $ 9.37 $ 9.29 $ 9.89 $ 10.03 $ 9.88 $ 10.10 ------- ------- ------- ------- ------- ------- Income (loss) from investment operations: Net investment income (loss) (c) ................ 0.27 0.59 0.55 0.55 0.59 0.56 Net realized and unrealized gain (loss) ......... 0.07 0.08 (0.60) 0.01 0.23 (0.14) ------- ------- ------- ------- ------- ------- Total from investment operations ................ 0.34 0.67 (0.05) 0.56 0.82 0.42 ------- ------- ------- ------- ------- ------- Less distributions from and in excess of: Net investment income ........................... (0.27) (0.59) (0.55) (0.55) (0.60) (0.57) Net realized gains .............................. -- -- -- (0.15) (0.07) (0.07) ------- ------- ------- ------- ------- ------- Total distributions ............................. (0.27) (0.59) (0.55) (0.70) (0.67) (0.64) ------- ------- ------- ------- ------- ------- Net asset value, end of period ................... $ 9.44 $ 9.37 $ 9.29 $ 9.89 $ 10.03 $ 9.88 ======= ======= ======= ======= ======= ======= TOTAL RETURN (a) ................................. 3.6% 7.5% (0.5)% 5.8% 8.6% 4.4% RATIOS AND SUPPLEMENTAL DATA: Net assets, end of period (in thousands) ......... $44,823 $54,847 $91,557 $100,397 $92,428 $69,906 Ratios to average net assets: Net expenses (b) ................................ 0.91% 0.82% 0.76% 0.78% 0.80% 0.80% Gross expenses (b) .............................. 0.91% 0.82% 0.76% 0.79% 0.81% 0.88% Net investment income (b) ....................... 5.67% 6.38% 5.74% 5.45% 5.81% 5.77% Portfolio turnover rate .......................... 143% 355% 549% 335% 447% 460%
FOR THE SIX MONTHS YEAR ENDED PERIOD ENDED ------------------------------------------- 3/5/97* TO 6/30/01+ 12/31/00 12/31/99 12/31/98 12/31/97 OPEN SHARES ------------ ------------ ------------- ------------ ----------- Net asset value, beginning of period ............. $ 9.37 $ 9.29 $ 9.88 $ 10.02 $ 9.86 ------- ------- -------- ------- ------- Income (loss) from investment operations: Net investment income (loss) (c) ................ 0.26 0.57 0.51 0.52 0.46 Net realized and unrealized gain (loss) ......... 0.07 0.08 (0.58) 0.01 0.24 ------- ------- -------- ------- ------- Total from investment operations ................ 0.33 0.65 (0.07) 0.53 0.70 ------- ------- -------- ------- ------- Less distributions from and in excess of: Net investment income ........................... (0.26) (0.57) (0.52) (0.52) (0.47) Net realized gains .............................. -- -- -- (0.15) (0.07) ------- ------- -------- ------- ------- Total distributions ............................. (0.26) (0.57) (0.52) (0.67) (0.54) ------- ------- -------- ------- ------- Net asset value, end of period ................... $ 9.44 $ 9.37 $ 9.29 $ 9.88 $10.02 ======= ======= ======== ======= ======= TOTAL RETURN (a) ................................. 3.5% 7.3% (0.8)% 5.4% 7.2% RATIOS AND SUPPLEMENTAL DATA: Net assets, end of period (in thousands) ......... $ 9,190 $11,457 $11,605 $15,226 $ 7,283 Ratios to average net assets: Net expenses (b) ................................ 1.10% 1.10% 1.10% 1.10% 1.10% Gross expenses (b) .............................. 1.35% 1.27% 1.15% 1.21% 1.49% Net investment income (b) ....................... 5.47% 6.13% 5.37% 5.11% 5.46% Portfolio turnover rate .......................... 143% 335% 549% 335% 447%
SEE NOTES TO FINANCIAL HIGHLIGHTS. THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS. 85 ================================================================================ THE LAZARD FUNDS, INC. FINANCIAL HIGHLIGHTS (CONTINUED) SELECTED DATA FOR A SHARE OF CAPITAL STOCK OUTSTANDING THROUGHOUT EACH PERIOD: -------------------------------------------------------------------------------- LAZARD HIGH YIELD PORTFOLIO
FOR THE SIX MONTHS YEAR ENDED PERIOD ENDED --------------------------- 1/2/98* TO 6/30/01+ 12/31/00 12/31/99 12/31/98 INSTITUTIONAL SHARES ------------ ------------ ------------ ----------- Net asset value, beginning of period ............. $ 6.57 $ 8.77 $ 9.42 $ 10.00 ------- ------- ------- ------- Income (loss) from investment operations: Net investment income (loss) (c) ................ 0.40 0.96 0.92 0.88 Net realized and unrealized gain (loss) ......... (0.20) (2.20) (0.65) (0.57) ------- ------- ------- ------- Total from investment operations ................ 0.20 (1.24) 0.27 0.31 ------- ------- ------- ------- Less distributions from and in excess of: Net investment income ........................... (0.40) (0.96) (0.92) (0.89) Net realized gains .............................. -- -- -- -- ------- ------- ------- ------- Total distributions ............................. (0.40) (0.96) (0.92) (0.89) ------- ------- ------- ------- Net asset value, end of period ................... $ 6.37 $ 6.57 $ 8.77 $ 9.42 ======= ======= ======= ======= TOTAL RETURN (a) ................................. 2.9% (15.2)% 2.9% 2.9% RATIOS AND SUPPLEMENTAL DATA: Net assets, end of period (in thousands) ......... $55,560 $65,752 $83,664 $41,935 Ratios to average net assets: Net expenses (b) ................................ 0.75% 0.75% 0.94% 1.05% Gross expenses (b) .............................. 1.07% 1.00% 1.06% 1.55% Net investment income (b) ....................... 12.02% 12.24% 10.08% 8.87% Portfolio turnover rate .......................... 117% 148% 190% 418%
FOR THE SIX MONTHS YEAR ENDED PERIOD ENDED --------------------------- 2/24/98* TO 6/30/01+ 12/31/00 12/31/99 12/31/98 OPEN SHARES ------------ ------------ ------------ -------------- Net asset value, beginning of period ............. $ 6.57 $ 8.78 $ 9.42 $ 10.37 ------- ------- ------- ------- Income (loss) from investment operations: Net investment income (loss) (c) ................ 0.39 0.94 0.90 0.72 Net realized and unrealized gain (loss) ......... (0.19) (2.21) (0.65) (0.94) ------- ------- ------- ------- Total from investment operations ................ 0.20 (1.27) 0.25 (0.22) ------- ------- ------- ------- Less distributions from and in excess of: Net investment income ........................... (0.39) (0.94) (0.89) (0.73) Net realized gains .............................. -- -- -- -- ------- ------- ------- ------- Total distributions ............................. (0.39) (0.94) (0.89) (0.73) ------- ------- ------- ------- Net asset value, end of period ................... $ 6.38 $ 6.57 $ 8.78 $ 9.42 ======= ======= ======= ======= TOTAL RETURN (a) ................................. 2.9% (15.5)% 2.7% ( 2.2)% RATIOS AND SUPPLEMENTAL DATA: Net assets, end of period (in thousands) ......... $11,401 $13,552 $ 1,305 $ 949 Ratios to average net assets: Net expenses (b) ................................ 1.05% 1.05% 1.22% 1.35% Gross expenses (b) .............................. 1.46% 1.38% 2.92% 9.77% Net investment income (b) ....................... 11.66% 12.10% 9.89% 8.59% Portoflio turnover rate .......................... 117% 148% 190% 418%
SEE NOTES TO FINANCIAL HIGHLIGHTS. THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS. 86 ================================================================================ THE LAZARD FUNDS, INC. FINANCIAL HIGHLIGHTS (CONTINUED) SELECTED DATA FOR A SHARE OF CAPITAL STOCK OUTSTANDING THROUGHOUT EACH PERIOD: -------------------------------------------------------------------------------- LAZARD INTERNATIONAL FIXED-INCOME PORTFOLIO
SIX MONTHS YEAR ENDED ENDED ------------------------------------------------------------------ 6/30/01+ 12/31/00 12/31/99 12/31/98 12/31/97 12/31/96 INSTITUTIONAL SHARES ------------- ------------- ------------- ------------ -------------- ---------- Net asset value, beginning of period ...... $ 9.60 $ 10.19 $ 10.71 $ 9.63 $ 10.78 $ 10.85 -------- ------- -------- ------- ------- ------- Income (loss) from investment operations: Net investment income (loss) (c) ......... 0.17 0.36 0.36 0.32 0.40 0.54 Net realized and unrealized gain (loss) .. (0.82) (0.83) (0.68) 0.98 (1.05) 0.03 -------- ------- ------- ------- -------- ------- Total from investment operations ......... (0.65) (0.47) (0.32) 1.30 (0.65) 0.57 -------- ------- ------- ------- ------- ------- Less distributions from and in excess of: Net investment income .................... (0.06) -- -- (0.22) (0.13) (0.59) Net realized gains ....................... -- -- (0.08) -- (0.12) (0.05) Capital .................................. -- (0.12) (0.12) -- (0.25) -- -------- ------- ------- ------- ------- ------- Total distributions ...................... (0.06) (0.12) (0.20) (0.22) (0.50) (0.64) -------- ------- ------- ------- ------- ------- Net asset value, end of period ............ $ 8.89 $ 9.60 $ 10.19 $10.71 $ 9.63 $10.78 ======== ======= ======= ======= ======= ======= TOTAL RETURN (a) .......................... (6.7)% (4.7)% (2.9)% 13.2% (5.6)% 5.5% RATIOS AND SUPPLEMENTAL DATA: Net assets, end of period (in thousands) .. $52,711 $ 63,409 $73,871 $115,500 $110,185 $88,430 Ratios to average net assets: Net expenses (b) ......................... 1.09% 1.09% 1.09% 1.09% 1.06% 1.05% Gross expenses (b) ....................... 1.15% 1.19% 1.13% 1.10% 1.10% 1.21% Net investment income (b) ................ 3.71% 3.79% 3.55% 4.27% 5.13% 5.54% Portfolio turnover rate ................... 44% 103% 139% 187% 166% 242%
FOR THE SIX MONTHS YEAR ENDED PERIOD ENDED ---------------------------------------- 1/8/97* TO 6/30/01+ 12/31/00 12/31/99 12/31/98 12/31/97 OPEN SHARES -------------- ------------- ------------- ------------ ------------- Net asset value, beginning of period ............. $ 9.53 $ 10.14 $ 10.69 $ 9.63 $ 10.64 -------- -------- ------- ------- -------- Income (loss) from investment operations: Net investment income (loss) (c) ................ 0.16 0.33 0.34 0.31 0.43 Net realized and unrealized gain (loss) ......... (0.81) (0.82) (0.69) 0.96 (0.98) -------- -------- -------- ------- -------- Total from investment operations ................ (0.65) (0.49) (0.35) 1.27 (0.55) -------- -------- -------- ------- -------- Less distributions from and in excess of: Net investment income ........................... (0.06) -- -- (0.21) (0.08) Net realized gains .............................. -- -- (0.08) -- (0.12) Capital ......................................... -- (0.12) (0.12) -- (0.26) -------- -------- -------- ------- -------- Total distributions ............................. (0.06) (0.12) (0.20) (0.21) (0.46) -------- -------- -------- ------- -------- Net asset value, end of period ................... $ 8.82 $ 9.53 $ 10.14 $10.69 $ 9.63 ======== ======== ======== ======= ======== TOTAL RETURN (a) ................................. (6.7)% (4.9)% (3.2)% 12.9% (4.8)% RATIOS AND SUPPLEMENTAL DATA: Net assets, end of period (in thousands) ......... $21,835 $23,310 $ 3,783 $4,751 $ 2,772 Ratios to average net assets: Net expenses (b) ................................ 1.35% 1.35% 1.35% 1.35% 1.35% Gross expenses (b) .............................. 1.45% 1.55% 1.91% 1.92% 2.71% Net investment income (b) ....................... 3.46% 3.54% 3.30% 4.01% 4.68% Portfolio turnover rate .......................... 44% 103% 139% 187% 166%
SEE NOTES TO FINANCIAL HIGHLIGHTS. THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS. 87 ================================================================================ THE LAZARD FUNDS, INC. FINANCIAL HIGHLIGHTS (CONTINUED) SELECTED DATA FOR A SHARE OF CAPITAL STOCK OUTSTANDING THROUGHOUT EACH PERIOD: -------------------------------------------------------------------------------- LAZARD STRATEGIC YIELD PORTFOLIO
SIX MONTHS YEAR ENDED ENDED ---------------------------------------------------------------- 6/30/01+ 12/31/00 12/31/99 12/31/98 12/31/97 12/31/96 INSTITUTIONAL SHARES ------------- ------------ ------------ ------------ ------------ ------------ Net asset value, beginning of period ............. $ 7.96 $ 8.83 $ 9.01 $ 9.66 $ 10.01 $ 9.52 ------- ------- ------- ------- ------- ------- Income (loss) from investment operations: Net investment income (loss) (c) ................ 0.26 0.59 0.61 0.76 0.81 0.76 Net realized and unrealized gain (loss) ......... 0.02 (0.49) (0.18) (0.69) (0.28) 0.50 ------- ------- ------- ------- ------- ------- Total from investment operations ................ 0.28 0.10 0.43 0.07 0.53 1.26 ------- ------- ------- ------- ------- ------- Less distributions from and in excess of: Net investment income ........................... (0.26) (0.97) (0.61) (0.44) (0.82) (0.77) Net realized gains .............................. -- -- -- -- (0.06) -- Capital ......................................... -- -- -- (0.28) -- -- ------- ------- ------- ------- ------- ------- Total distributions ............................. (0.26) (0.97) (0.61) (0.72) (0.88) (0.77) ------- ------- ------- ------- ------- ------- Net asset value, end of period ................... $ 7.98 $ 7.96 $ 8.83 $ 9.01 $ 9.66 $ 10.01 ======= ======= ======= ======= ======= ======= TOTAL RETURN (a) ................................. 3.6% 1.1% 4.9% 0.8% 5.3% 13.7% RATIOS AND SUPPLEMENTAL DATA: Net assets, end of period (in thousands) ......... $221,556 $240,162 $306,116 $397,599 $399,452 $199,083 Ratios to average net assets: Net expenses (b) ................................ 0.92% 0.93% 0.91% 0.90% 0.94% 1.08% Gross expenses (b) .............................. 0.93% 0.93% 0.91% 0.90% 0.95% 1.08% Net investment income (b) ....................... 6.53% 6.82% 6.82% 6.94% 7.42% 7.88% Portfolio turnover rate .......................... 131% 207% 257% 276% 161% 189%
FOR THE SIX MONTHS YEAR ENDED PERIOD ENDED ------------------------------------------ 1/23/97* TO 6/30/01+ 12/31/00 12/31/99 12/31/98 12/31/97 OPEN SHARES ------------ ------------ ------------ ------------ ------------ Net asset value, beginning of period ............. $ 7.96 $ 8.83 $ 9.02 $ 9.66 $ 10.08 ------- ------- ------- ------- ------- Income (loss) from investment operations: Net investment income (loss) (c) ................ 0.24 0.55 0.58 0.73 0.72 Net realized and unrealized gain (loss) ......... 0.02 (0.49) (0.19) (0.69) (0.35) ------- ------- ------- ------- ------- Total from investment operations ................ 0.26 0.06 0.39 0.04 0.37 ------- ------- ------- ------- ------- Less distributions from and in excess of: Net investment income ........................... (0.24) (0.93) (0.58) (0.40) (0.73) Net realized gains .............................. -- -- -- -- (0.06) Capital ......................................... -- -- -- (0.28) -- ------- ------- ------- ------- ------- Total distributions ............................. (0.24) (0.93) (0.58) (0.68) (0.79) ------- ------- ------- ------- ------- Net asset value, end of period ................... $ 7.98 $ 7.96 $ 8.83 $ 9.02 $ 9.66 ======= ======= ======= ======= ======= TOTAL RETURN (a) ................................. 3.3% 0.7% 4.4% 0.4% 3.8% RATIOS AND SUPPLEMENTAL DATA: Net assets, end of period (in thousands) ......... $ 7,459 $ 9,633 $16,035 $22,460 $15,300 Ratios to average net assets: Net expenses (b) ................................ 1.48% 1.34% 1.27% 1.28% 1.39% Gross expenses (b) .............................. 1.48% 1.34% 1.27% 1.28% 1.44% Net investment income (b) ....................... 5.96% 6.40% 6.49% 6.60% 6.92% Portfolio turnover rate .......................... 131% 207% 257% 276% 161%
SEE NOTES TO FINANCIAL HIGHLIGHTS. THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS. 88 ================================================================================ THE LAZARD FUNDS, INC. FINANCIAL HIGHLIGHTS (CONCLUDED) SELECTED DATA FOR A SHARE OF CAPITAL STOCK OUTSTANDING THROUGHOUT EACH PERIOD: -------------------------------------------------------------------------------- LAZARD MORTGAGE PORTFOLIO
FOR THE SIX MONTHS PERIOD ENDED 12/29/00* TO 6/30/01+ 12/31/00 INSTITUTIONAL SHARES ------------ ------------------- Net asset value, beginning of period ............. $ 10.00 $ 10.00 ------- -------- Income (loss) from investment operations: Net investment income (loss) (c) ................ 0.25 --(d) Net realized and unrealized gain (loss) ......... 0.07 -- ------- -------- Total from investment operations ................ 0.32 -- ------- -------- Less distributions from and in excess of: Net investment income ........................... (0.25) --(d) Net realized gains .............................. -- -- ------- -------- Total distributions ............................. (0.25) -- ------- -------- Net asset value, end of period ................... $ 10.07 $ 10.00 ======= ======== TOTAL RETURN (a) ................................. 3.2% 0.04% RATIOS AND SUPPLEMENTAL DATA: Net assets, end of period (in thousands) ......... $ 5,777 $ 100 Ratios to average net assets: Net expenses (b) ................................ 0.65% 0.65% Gross expenses (b) .............................. 2.22% 570.50%(e) Net investment income (b) ....................... 5.05% 4.38% Portfolio turnover rate .......................... 359% 0%
SEE NOTES TO FINANCIAL HIGHLIGHTS. THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS. 89 ================================================================================ THE LAZARD FUNDS, INC. NOTES TO FINANCIAL HIGHLIGHTS -------------------------------------------------------------------------------- * Commencement of operations. + Unaudited. (a) Total returns are historical and assume changes in share price, reinvestment of all dividends and distributions, and no sales load. Periods of less than one year are not annualized. (b) Annualized for periods of less than one year. (c) For periods after and including 12/31/99, net investment income has been computed using the average shares method. (d) Amount is less than $0.01 per share. (e) Gross expense ratio is the result of the Portfolio being in existence for three days during the period ended 12/31/00. THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS. 90 ================================================================================ THE LAZARD FUNDS, INC. NOTES TO FINANCIAL STATEMENTS JUNE 30, 2001 (UNAUDITED) -------------------------------------------------------------------------------- 1. ORGANIZATION The Lazard Funds, Inc. (the "Fund") was incorporated in Maryland on May 17, 1991 and is registered under the Investment Company Act of 1940, as amended (the "Act"), as an open-end management investment company. The Fund is comprised of thirteen no-load portfolios (each referred to as a "Portfolio"), as follows: Lazard Equity Portfolio, Lazard Mid Cap Portfolio, Lazard Small Cap Portfolio, Lazard Global Equity Portfolio, Lazard International Equity Portfolio, Lazard International Small Cap Portfolio, Lazard Emerging Markets Portfolio, Lazard International Equity Select Portfolio (which commenced operations on May 31, 2001), Lazard Bond Portfolio, Lazard High Yield Portfolio, Lazard International Fixed-Income Portfolio, Lazard Strategic Yield Portfolio and Lazard Mortgage Portfolio. The Fund offers two different classes of shares of the Portfolios--Institutional Shares and Open Shares. Institutional Shares and Open Shares are identical, except as to minimum investment requirements and the services offered to and expenses borne by each class of shares. As of June 30, 2001 only Institutional Shares have been offered for Mortgage Portfolio. All Portfolios are operated as "diversified" funds as defined in the Act. 2. SIGNIFICANT ACCOUNTING POLICIES The following is a summary of significant accounting policies: (A) VALUATION OF INVESTMENTS--Market values for equity securities listed on the New York Stock Exchange ("NYSE"), NASDAQ or other U.S. exchanges are based on the last quoted sales price on the principal exchange on which the security is traded, generally as of the close of regular trading on the NYSE (normally 4:00 p.m. Eastern time) on each valuation date; securities not traded on the valuation date are valued at the closing bid price. Any securities not listed, for which current over-the-counter market quotations or bids are readily available, are valued at the last quoted bid price or, if available, the mean of two such prices. Securities listed on foreign exchanges are valued at the last quoted sales price; securities not traded on the valuation date are valued at the closing bid price. Bonds and other fixed-income securities are valued on the basis of prices provided by pricing services which are based primarily on institutional-size trading in similar groups of securities, or by using brokers' quotations. Mortgage-backed securities issued by certain government related organizations are valued using pricing services or brokers' quotations based on a matrix system which considers such factors as other security prices, yields and maturities. Debt securities maturing in sixty days or less are valued at amortized cost except where to do so would not accurately reflect their fair value, in which case such securities are valued at fair value as determined under the supervision of the Board of Directors. Securities for which market quotations are not readily available are valued at fair value as determined in good faith using methods approved by the Board of Directors. (B) PORTFOLIO SECURITIES TRANSACTIONS AND INVESTMENT INCOME--Portfolio securities transactions are accounted for on trade date. Realized gains and losses on sales of investments are recorded on a specific identification basis. Dividend income is recorded on the ex-dividend date and interest income is accrued daily. The Portfolios amortize premiums and accrete discounts on fixed-income securities using the effective yield method. (C) REPURCHASE AGREEMENTS--In connection with transactions in repurchase agreements, the Fund's custodian takes possession of the underlying collateral securities, the value or market price of which is at least equal to the principal amount, plus interest, of the repurchase transaction. To the extent that any repurchase transaction exceeds one business day, the value of the collateral is marked-to-market daily to ensure the adequacy of the collateral. In the event of default of the obligation to repurchase, a Portfolio has the right to liquidate the collateral and apply the proceeds in satisfaction of the obligation. Under certain circumstances, such as the default or bankruptcy by the other party to the agreement, realization and/or retention of the collateral or proceeds may be subject to delay due to legal proceedings and the Portfolio may suffer a loss. (D) SECURITIES LENDING--The Portfolios may lend portfolio securities to qualified borrowers in order to earn additional income. The terms of the lending agreements require that loans are secured at all times by cash, U.S. Government securities, or irrevocable letters of credit in an amount at least equal to 102% of the market value of domestic securities loaned (105% in the case of foreign securities), plus accrued interest and dividends, determined on a daily basis. Cash collateral received is invested in Navigator Securities Lending Prime Portfolio, a regulated investment company offered by State Street Corporation ("State Street"). If the borrower defaults on its obligation to return the securities loaned because of insolvency or other reasons, the Portfolios could experience delays and costs in recovering the securities loaned or in gaining access to the collateral. At June 30, 2001, the value of the securities on loan and corresponding collateral received were as follows: 91 ================================================================================ THE LAZARD FUNDS, INC. NOTES TO FINANCIAL STATEMENTS (CONTINUED) JUNE 30, 2001 (UNAUDITED) --------------------------------------------------------------------------------
SECURITIES PORTFOLIO LOANED COLLATERAL ---------------------------- -------------- -------------- Mid Cap(2) $ 5,796,806 $ 6,035,661 Small Cap(1) 268,000 280,000 Global Equity(2) 8,794,512 9,249,665 International Equity(1) 150,735,202 158,524,627 International Small Cap(2) 25,089,518 26,369,186 Emerging Markets(2) 75,640,209 79,428,364
(1) COLLATERAL IS U.S. TREASURY OBLIGATIONS. (2) COLLATERAL IS CASH. In accordance with generally accepted accounting principles, the cash collateral received and the amount payable upon return of the securities on loan are shown on the accompanying Statement of Assets and Liabilities of the respective Portfolios. During the period ended June 30, 2001, the income earned from securities lending, which is included in interest income on the Statement of Operations of the respective Portfolio, was as follows:
SECURITIES LENDING PORTFOLIO INCOME ------------------------- ------------------- Mid Cap $ 4,628 Small Cap 26,233 Global Equity 36,318 International Equity 954,192 International Small Cap 156,611 Emerging Markets 206,777
(E) FOREIGN CURRENCY TRANSLATION AND FORWARD FOREIGN CURRENCY CONTRACTS--The accounting records of the Portfolios are maintained in U.S. dollars. Portfolio securities and other assets and liabilities denominated in a foreign currency are translated daily into U.S. dollars at the prevailing rates of exchange. Purchases and sales of securities, income receipts and expense payments are translated into U.S. dollars at the prevailing exchange rates on the respective transaction dates. The Portfolios do not isolate the portion of operations resulting from changes in foreign exchange rates on investments from the fluctuations arising from changes in their market prices. Such fluctuations are included in net realized and unrealized gain or loss from investments. Net realized gains (losses) from foreign currency transactions represent net foreign currency gains (losses) from forward foreign currency contracts, disposition of foreign currencies, currency gains or losses realized between the trade and settlement dates on securities transactions, and the difference between the amount of net investment income recorded on the Portfolio's accounting records and the U.S. dollar equivalent amounts actually received or paid. Net unrealized foreign currency gains and losses arise from changes in the value of assets and liabilities, other than investments in securities, as a result of changes in exchange rates. A forward foreign currency contract is an agreement between two parties to buy or sell currency at a set price on a future date. Certain Portfolios may enter into forward foreign currency contracts for risk management. Risk management includes hedging strategies which serve to reduce a Portfolio's exposure to foreign currency fluctuations. Such exposure may exist during the period that a foreign denominated investment is held, or during the period between the trade date and settlement date of an investment which has been purchased or sold. Upon entering into these contracts, risks may arise from the potential inability of counterparties to meet the terms of their contracts and from unanticipated movements in the value of the foreign currency relative to the U.S. dollar. The U.S. dollar value of forward foreign currency contracts is determined using forward exchange rates provided by quotation services. Daily fluctuations in the value of such contracts are recorded as unrealized gains or losses. When the contract is closed, the Portfolio records a realized gain or loss equal to the difference between the value at the time it was opened and the value at the time it was closed. Such gains and losses are disclosed in the realized or unrealized gain (loss) on foreign currency in the accompanying Statement of Operations of the respective Portfolios. (F) FEDERAL INCOME TAXES-- The Fund's policy is to continue to have each Portfolio qualify as a regulated investment company under the Internal Revenue Code and to distribute all of its taxable income, including any realized net capital gains, to shareholders. Therefore, no federal income tax provision is required. At December 31, 2000, the following Portfolios had available for federal income tax purposes unused realized capital losses which can be used to offset future realized capital gains as follows:
PORTFOLIO EXPIRING 2006 EXPIRING 2007 EXPIRING 2008 ------------------ --------------- --------------- -------------- Emerging Markets $31,081,131 $3,337,906 $ -- Bond -- 4,509,552 2,509,149 High Yield 1,150,441 6,288,085 9,656,682 International Fixed-Income -- 513,432 733,222 Strategic Yield 14,900,897 22,094,886 9,399,400
Under current tax law, certain capital and net foreign currency losses realized after October 31 within the taxable year may be deferred and treated as occurring on the first day of the following tax year. For the tax year ended December 31, 2000, the following Portfolios elected to defer net capital and currency losses arising between November 1, 2000 and December 31, 2000, as follows: 92 ================================================================================ THE LAZARD FUNDS, INC. NOTES TO FINANCIAL STATEMENTS (CONTINUED) JUNE 30, 2001 (UNAUDITED) --------------------------------------------------------------------------------
PORTFOLIO AMOUNT ---------------------------- ------------- Small Cap $1,689,180 Global Equity 1,056,558 International Equity 1,395,138 International Small Cap 8,036,776 Emerging Markets 10,660,849 Bond 252,138 High Yield 5,070,450 International Fixed-Income 74,020 Strategic Yield 7,262,712
(G) DIVIDENDS AND DISTRIBUTIONS--The Fund intends to declare dividends from net investment income daily on shares of Bond Portfolio, High Yield Portfolio, International Fixed-Income Portfolio, Strategic Yield Portfolio and Mortgage Portfolio and to pay such dividends monthly. Dividends from net investment income on shares of Equity Portfolio, Mid Cap Portfolio, Small Cap Portfolio, Global Equity Portfolio, International Equity Portfolio, International Small Cap Portfolio, Emerging Markets Portfolio and International Equity Select Portfolio will be declared and paid annually. During any particular year, net realized gains from investment transactions in excess of available capital loss carryforwards would be taxable to the Portfolio if not distributed. The Portfolios intend to declare and distribute these amounts annually to shareholders; however, to avoid taxation, a second distribution may be required. Income dividends and capital gains distributions are determined in accordance with federal income tax regulations which may differ from generally accepted accounting principles. These differences, which may result in distribution reclassifications, are primarily due to differing treatments of foreign currency transactions. Book and tax differences relating to shareholder distributions will result in reclassifications between investment income-net, realized gains-net, and paid in capital. As a result of these book/tax differences, the Portfolios made the following reclassifications to the capital accounts for the period ended December 31, 2000:
INCREASE (DECREASE) --------------------------------------------------------------------- UNDISTRIBUTED ACCUMULATED INVESTMENT REALIZED INCOME GAIN PORTFOLIO PAID IN CAPITAL (LOSS)-NET (LOSS)-NET ---------------------- ------------------- ----------------------- --------------------- Equity $3,822,883 $ 20,388 $(3,843,271) Mid Cap -- 12,522 (12,522) Small Cap 129,738 (38,740) (90,998) Global Equity (31,048) (49,900) 80,948 International Equity (3,838,230) 36,972,710 (33,134,480) International Small Cap -- (770,406) 770,406 Emerging Markets (2,775) (540,812) 543,587
INCREASE (DECREASE) --------------------------------------------------------------------- UNDISTRIBUTED ACCUMULATED INVESTMENT REALIZED INCOME GAIN PORTFOLIO PAID IN CAPITAL (LOSS)-NET (LOSS)-NET ---------------------- ------------------- ----------------------- --------------------- Bond $ (471,061) $ 383,409 $ 87,652 High Yield -- -- -- International Fixed-Income (1,162,835) (3,053,438) 4,216,273 Strategic Yield -- 1,251,937 (1,251,937) Mortgage (11) 11 --
(H) ORGANIZATIONAL AND OFFERING EXPENSES--Costs incurred by the Fund in connection with its organization and initial offering have been deferred and are being amortized on a straight line basis over a five-year period from the date of commencement of operations of each Portfolio, except in the case of offering and initial registration expenses incurred by International Equity Select Portfolio and Mortgage Portfolio. Those fees are being amortized over a one-year period starting from the date the Portfolios commenced operations. All organizational costs associated with International Equity Select Portfolio and Mortgage Portfolio have been borne by Lazard Asset Management (the "Investment Manager"). In the event that any of the initial shares of any of the Portfolios are redeemed during such amortization period, the appropriate Portfolio will be reimbursed by the initial shareholder for any unamortized organizational expenses in the same proportion as the number of shares redeemed bears to the number of initial shares held at the time of redemption. (I) ALLOCATION OF EXPENSES--Expenses not directly chargeable to a specific Portfolio are allocated among the Portfolios primarily on the basis of relative net assets. The Portfolios will accrue distribution fees to its Open Share class. Each Portfolio's income, expenses (other than the fees mentioned above) and realized and unrealized gains and losses are allocated proportionally each day between the classes based upon the relative net assets of each class. (J) EXPENSE REDUCTIONS--Portfolios leaving excess cash in demand deposit accounts may receive credits which are available to offset custody expenses. The Statements of Operations report gross custody expenses, and report the amount of such credits separately as an expense reduction. (K) STRUCTURED INVESTMENTS--Certain Portfolios may invest in structured investments, whose values are linked either directly or inversely to changes in foreign currencies, interest rates, commodities, indices, or other underlying instruments. A Portfolio uses these investments to increase or decrease its exposure to different underlying instruments and to gain exposure to markets that might be difficult to invest in through conventional securities. Structured 93 ================================================================================ THE LAZARD FUNDS, INC. NOTES TO FINANCIAL STATEMENTS (CONTINUED) JUNE 30, 2001 (UNAUDITED) -------------------------------------------------------------------------------- investments may be more volatile than their underlying instruments, but any loss is limited to the amount of the original investment. (L) FORWARD COMMITMENTS--Each Portfolio may purchase or sell securities on a forward commitment, when-issued or delayed delivery basis. Payment and delivery may take place a month or more after the date of the transaction. The price and yield of the underlying securities and the date when the securities will be delivered and paid for are fixed at the time the transaction is negotiated. Collateral consisting of cash or liquid securities is segregated in an amount at least equal to these commitments. (M) FORWARD ROLL TRANSACTIONS--Mortgage Portfolio may engage in forward roll transactions with respect to mortgage-related securities. In a forward roll transaction, the Portfolio sells a mortgage-related security to a financial institution and, simultaneously, agrees to purchase a similar security from that institution at a later date and agreed upon price. At all times during the transaction the Portfolio will segregate cash or liquid securities at least equal to the amount of the repurchase price (including accrued interest). (N) ESTIMATES--The preparation of financial statements in conformity with generally accepted accounting principles requires the Fund to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of income and expense during the reporting period. Actual results could differ from those estimates. 3. INVESTMENT MANAGEMENT, ADMINISTRATIVE AND DISTRIBUTION AGREEMENTS The Fund has entered into investment management agreements (the "Management Agreements") with Lazard Asset Management, a division of Lazard Fr-res & Co. LLC, on behalf of each Portfolio. Pursuant to the Management Agreements, the Investment Manager will regularly provide the Portfolios with investment research, advice and supervision and furnish continuously an investment program for each Portfolio consistent with its investment objectives and policies, including the purchase, retention and disposition of securities. Each Portfolio pays the Investment Manager an investment management fee at the annual rate set forth below as a percentage of the average daily net assets of the relevant Portfolio:
PORTFOLIO ANNUAL RATE ----------------------------- ------------ Equity 0.75% Mid Cap 0.75 Small Cap 0.75 Global Equity 0.75 International Equity 0.75 International Small Cap 0.75 Emerging Markets 1.00 International Equity Select 0.85 Bond 0.50 High Yield 0.75 International Fixed-Income 0.75 Strategic Yield 0.75 Mortgage 0.40
The investment management fees are accrued daily and paid monthly. The Investment Manager has voluntarily agreed to reduce its fees and, if necessary, reimburse the following Portfolios if annualized operating expenses exceed the following per-centages of average daily net assets for the respective Shares:
INSTITUTIONAL SHARES OPEN SHARES ANNUAL ANNUAL PORTFOLIO OPERATING EXPENSES OPERATING EXPENSES ----------------------------- ---------------------- -------------------- Mid Cap 1.05% 1.35% Global Equity 1.05 1.35 International Small Cap N/A 1.43 Emerging Markets N/A 1.60 International Equity Select 1.15 1.45 Bond N/A 1.10 High Yield 0.75 1.05 International Fixed-Income 1.09 1.35 Mortgage 0.65 N/A
For the period ended June 30, 2001, the Investment Manager waived its management fee/reimbursed the indicated Portfolios for other expenses as follows:
INSTITUTIONAL SHARES OPEN SHARES AMOUNT WAIVED/ AMOUNT WAIVED/ PORTFOLIO REIMBURSED REIMBURSED ----------------------------- ---------------------- ------------------- Mid Cap $50,663 $25,472 Global Equity -- 10,160 International Small Cap -- 10,078 Emerging Markets -- 11,832 International Equity Select 13,341 1,039 Bond -- 12,718 High Yield 97,558 26,366 International Fixed-Income 17,692 11,833 Mortgage 32,602 N/A
94 ================================================================================ THE LAZARD FUNDS, INC. NOTES TO FINANCIAL STATEMENTS (CONCLUDED) JUNE 30, 2001 (UNAUDITED) -------------------------------------------------------------------------------- The Fund has entered into an administrative agreement with State Street to provide certain administrative services. Each Portfolio bears the cost of such services at the annual rate of $37,500, plus $7,500 per additional class, and 0.02% of average daily net assets up to $1 billion plus 0.01% of average daily net assets over $1 billion. State Street has agreed to waive the $37,500 base fee and the $7,500 additional class fee, if applicable, for the first six months of International Equity Select and Mortgage Portfolios' operations. Thereafter, the monthly base fee and additional class fee, if applicable, will be increased by 1/6 per month through the twelfth month of operations after which the full monthly base fee will be in effect. These waivers will be in effect during the first 12 months of operations or until the respective Portfolio reaches $25 million in net assets, whichever comes first. The Fund has a distribution agreement with Lazard Fr-res & Co. LLC (the "Distributor"). The Distributor acts as distributor for shares of each of the Portfolios and bears the cost of printing and mailing prospectuses to potential investors and of any advertising expenses incurred in connection with distribution of shares. The Distributor provides the Open Shares of each Portfolio with distribution services pursuant to a Distribution and Servicing Plan (the "Plan") in accordance with Rule 12b-1 under the Act. Under the Plan, each Portfolio pays a monthly fee to the Distributor at an annual rate of 0.25% of the average daily net assets of the Portfolio's Open Shares for distribution and servicing of accounts. The Distributor may make payments to certain financial institutions, securities dealers and other industry professionals for providing these services. Certain Directors of the Fund are Managing Directors of the Investment Manager. The Fund pays each Director who is not an employee or an affiliated person of the Investment Manager its allocated portion of a fixed fee of $30,000 per year, plus $2,500 per meeting attended for the Fund and Lazard Retirement Series, Inc., another multi-portfolio fund advised by the Investment Manager, and reimburses such Directors for travel and other out of pocket expenses. In addition, the Chairman of the Audit Committee for the Fund and Lazard Retirement Series, Inc. also receives an annual fee of $5,000. 4. SECURITIES TRANSACTIONS AND TRANSACTIONS WITH AFFILIATES Purchases and sales of portfolio securities (excluding short-term securities), for the period ended June 30, 2001 were as follows:
PORTFOLIO PURCHASES SALES ------------------------------- --------------- --------------- Equity $111,282,139 $146,896,387 Mid Cap 17,811,685 17,755,798 Small Cap 288,321,330 451,299,326 Global Equity 21,628,649 22,709,096 International Equity 813,088,788 882,911,925 International Small Cap 16,809,249 23,805,238 Emerging Markets 91,198,650 64,827,532 International Equity Select 311,724 -- Bond(1) 84,823,042 94,216,738 High Yield 84,710,676 94,506,501 International Fixed-Income(2) 32,164,139 33,631,991 Strategic Yield(3) 224,711,710 217,593,520 Mortgage(4) 10,679,323 8,571,092
(1) INCLUDES PURCHASES AND SALES OF U.S. GOVERNMENT SECURITIES OF $68,411,568 AND $83,640,278 RESPECTIVELY. (2) INCLUDES PURCHASES AND SALES OF U.S. GOVERNMENT SECURITIES OF $0 AND $3,586,842 RESPECTIVELY. (3) INCLUDES PURCHASES AND SALES OF U.S. GOVERNMENT SECURITIES OF $69,920,307 AND $60,317,465, RESPECTIVELY. (4) INCLUDES PURCHASES AND SALES OF U.S. GOVERNMENT SECURITIES OF $8,868,623 AND $7,292,443, RESPECTIVELY. For the period ended June 30, 2001 brokerage commissions were paid to Lazard Fr-res & Co. LLC for portfolio transactions executed on behalf of certain of the Portfolios as follows:
COMMISSIONS PORTFOLIO PAID --------------- ------------ Mid Cap $1,675 Global Equity 665
5. LINE OF CREDIT The Fund has entered into a $50 million Line of Credit Agreement (the "Agreement") with State Street effective April 24, 1996, primarily for temporary or emergency purposes, including the meeting of redemption requests that otherwise might require the untimely disposition of securities. Interest on borrowings is payable at State Street's Cost of Funds plus 0.50%, on an annualized basis. Under this Agreement, the Fund has agreed to pay a 0.09% per annum fee on the unused portion of the commitment, payable quarterly in arrears. During the period ended June 30, 2001, the Fund had no borrowings under this Agreement. 6. SUBSEQUENT EVENT Effective July 1, 2001, each Portfolio may impose a 1.00% redemption fee (short-term trading fee) on Portfolio shares acquired by purchase or exchange on or after July 1, 2001 and redeemed or exchanged less than 30 days after such shares were acquired. The fees retained by the affected Portfolio will be included as paid in capital on its Statement of Assets and Liabilities. 95 [THIS PAGE LEFT BLANK INTENTIONALLY] [THIS PAGE LEFT BLANK INTENTIONALLY] [THIS PAGE LEFT BLANK INTENTIONALLY] THE LAZARD FUNDS, INC. 30 Rockefeller Plaza New York, New York 10112 Telephone: (800) 823-6300 http://www.lazardnet.com INVESTMENT MANAGER Lazard Asset Management, a division of Lazard Freres & Co. LLC 30 Rockefeller Plaza New York, New York 10112 Telephone: (800) 823-6300 DISTRIBUTOR Lazard Freres & Co. LLC 30 Rockefeller Plaza New York, New York 10112 CUSTODIAN State Street Corporation 225 Franklin Street Boston, Massachusetts 02110 TRANSFER AGENT AND DIVIDEND DISBURSING AGENT Boston Financial Data Services, Inc. P.O. Box 9363 Boston, Massachusetts 02205-9363 Telephone: (800) 986-3455 INDEPENDENT PUBLIC ACCOUNTANTS Anchin, Block & Anchin LLP 1375 Broadway New York, New York 10018 http://www.anchin.com LEGAL COUNSEL Stroock & Stroock & Lavan LLP 180 Maiden Lane New York, New York 10038-4982 http://www.stroock.com LAZARDFunds 30 Rockefeller Plaza New York, New York 10112 Telephone (800) 823-6300 http://www.lazardnet.com This report is for the information of the shareholders of The Lazard Funds, Inc. Its use in connection with any offering of the Fund's shares is authorized only in the case of a concurrent or prior delivery of the Fund's current prospectus. MF03101 LAZARD FUNDS, INC. PART C OTHER INFORMATION Item 15 Indemnification The response to this item is incorporated by reference to Item 25 of Part C of Post-Effective Amendment No. 17 to the Registrant's Registration Statement on Form N-1A, filed on February 26, 1999. Item 16 Exhibits (1)(a) Articles of Incorporation(1) (1)(b) Articles of Amendment(1) (1)(c) Articles Supplementary(11) (1)(d) Articles Supplementary(12) (2) By-Laws(1) (3) Not Applicable (4) Form of Agreement and Plan of Reorganization(13) (5) Not Applicable (6)(a) Investment Management Agreement between the Registrant and Lazard Asset Management with respect to the Lazard International Equity Portfolio(4) (6)(b) Investment Management Agreement between the Registrant and Lazard Asset Management with respect to the Lazard International Fixed-Income Portfolio(4) (6)(c) Investment Management Agreement between the Registrant and Lazard Asset Management with respect to the Lazard Bond Portfolio(4) (6)(d) Investment Management Agreement between the Registrant and Lazard Asset Management with respect to the Lazard Strategic Yield Portfolio(4) (6)(e) Investment Management Agreement between the Registrant and Lazard Asset Management with respect to the Lazard Small Cap Portfolio(4) (6)(f) Investment Management Agreement between the Registrant and Lazard Asset Management with respect to the Lazard Equity Portfolio(4) (6)(g) Investment Management Agreement between the Registrant and Lazard Asset Management with respect to the Lazard Emerging Markets Portfolio(3) (6)(h) Investment Management Agreement between the Registrant and Lazard Asset Management with respect to the Lazard International Small Cap Portfolio(3) (6)(i) Investment Management Agreement between the Registrant and Lazard Asset Management with respect to the Lazard Global Equity Portfolio(5) (6)(j) Investment Management Agreement between the Registrant and Lazard Asset Management with respect to the Lazard Mortgage Portfolio(12) (6)(k) Form of Investment Management Agreement between the Registrant and Lazard Asset Management with respect to the Lazard International Equity Select Portfolio(12) (6)(l) Investment Management Agreement between the Registrant and Lazard Asset Management with respect to the Lazard Mid Cap Portfolio(8) (6)(m) Investment Management Agreement between the Registrant and Lazard Asset Management with respect to the Lazard High Yield Portfolio(8) (7) Distribution Agreement, as revised(7) (8) Not Applicable (9) Custodian Contract(2) (10)(a) Distribution and Servicing Plan, as revised(12) (10)(b) Rule 18f-3 Plan, as revised(12) (11) Opinion and Consent of Counsel(6) (12) Opinion and Consent of Counsel Regarding Tax Matters(14) (13) Not Applicable (14) Consent of Independent Auditors (15) Not Applicable (16) Not Applicable (17)(a) Form of Proxy(15) (17)(b) Registrant's Prospectus dated May 1, 2001(12) ---------- 1. Incorporated by reference from the Registrant's Registration Statement on Form N-1A (file Nos. 33-40682 and 811-6312) filed with the Securities and Exchange Commission (the "SEC") on May 20, 1991. 2. Incorporated by reference from the Registrant's Pre-Effective Amendment No. 1 filed with the SEC on July 23, 1991. 3. Incorporated by reference from the Registrant's Post-Effective Amendment No. 5 filed with the SEC on September 1, 1993. 4. Incorporated by reference from the Registrant's Post-Effective Amendment No. 6 filed with the SEC on March 31, 1994. 5. Incorporated by reference from the Registrant's Post-Effective Amendment No. 8 filed with the SEC on October 13, 1995. 6. Incorporated by reference from the Registrant's Post-Effective Amendment No. 9 filed with the SEC on December 27, 1995. 7. Incorporated by reference from the Registrant's Post-Effective Amendment No. 10 filed with the SEC on August 15, 1996. 8. Incorporated by reference from the Registrant's Post-Effective Amendment No. 15 filed with the SEC on October 31, 1997. 9. Incorporated by reference from the Registrant's Post-Effective Amendment No. 19 filed with the SEC on May 1, 2000. 10. Incorporated by reference from the Registrant's Post-Effective Amendment No. 20 filed with the SEC on August 15, 2000. 11. Incorporated by reference from the Registrant's Post-Effective Amendment No. 22 filed with the SEC on December 29, 2000. 12. Incorporated by reference from the Registrant's Post-Effective Amendment No. 25 filed with the SEC on April 30, 2001 (Accession Number: 0000930413- 01-500388). 13. Filed Herewith as Exhibit A to the Prospectus/Proxy Statement 14. To Be Filed by Amendment 15. Filed Herewith as Part of the Prospectus/Proxy Statement Item 17 Undertakings (1) The undersigned Registrant agrees that prior to any public reoffering of the securities registered through the use of a prospectus which is a part of this Registration Statement by any person or party who is deemed to be an underwriter within the meaning of Rule 145(c) of the Securities Act of 1933, the reoffering prospectus will contain the information called for by the applicable registration form for reofferings by persons who may be deemed underwriters, in addition to the information called for by the other items of the applicable form. (2) The undersigned Registrant agrees that every prospectus that is filed under paragraph (1) above will be filed as a part of an amendment to the Registration Statement and will not be used until the amendment is effective, and that, in determining any liability under the Securities Act of 1933 each post-effective amendment shall be deemed to be a new registration statement for the securities offered therein, and the offering of the securities at that time shall be deemed to be the initial bona fide offering of them. (3) The undersigned Registrant agrees to file by post-effective amendment to the Registration Statement the final opinion and consent of counsel regarding tax matters within a reasonable period of time after receiving such opinion. SIGNATURES ---------- As required by the Securities Act of 1933, this Registration Statement has been signed on behalf of the Registrant, in the City of New York and State of New York, on the 17th day of October, 2001. THE LAZARD FUNDS, INC. (Registrant) By: /s/ Herbert W. Gullquist ----------------------- Herbert W. Gullquist, President Pursuant to the requirements of the Securities Act of 1933, this Registration Statement has been signed by the following persons in the capacities and on the dates indicated. /s/ Herbert W. Gullquist President (Principal Executive, October 17, 2001 ------------------------ Financial and Accounting Officer) Herbert W. Gullquist and Director /s/ Norman Eig ------------------------ Director October 17, 2001 Norman Eig /s/John J. Burke Director October 17, 2001 ------------------------ John J. Burke /s/ Kenneth S. Davidson Director October 17, 2001 ------------------------ Kenneth S. Davidson //s/ William Katz Director October 17, 2001 ------------------------ William Katz /s/ Lester Z. Lieberman Director October 17, 2001 ------------------------ Lester Z. Lieberman /s/ Richard Reiss, Jr. Director October 17, 2001 ------------------------ Richard Reiss, Jr. /s/ John Rutledge Director October 17, 2001 ------------------------ John Rutledge EX-14 3 c22088_ex-14.txt CONSENT OF INDEPENDENT AUDITORS EXHIBIT 14 CONSENT OF INDEPENDENT AUDITORS We consent to the reference to our firm under the caption "Financial Statements and Experts" in the Prospectus/Proxy Statement and to the incorporation by reference of our report on the financial statements of The Lazard Funds, Inc., in respect of its Lazard Global Equity Portfolio and Lazard International Equity Portfolio, dated December 31, 2000, in this Registration Statement (Form N-14) of The Lazard Funds, Inc. ANCHIN, BLOCK & ANCHIN LLP New York, New York October 17, 2001